Potentially, Rigetti Computing Could Emerge as the Next IonQ in Quantum Computing Sector
When quantum computing heavyweight IonQ (IONQ -1.43%) entered the public arena via a merge with a special purpose acquisition company (SPAC) in October 2021, it touted itself as the "only public pure-play" in the sector, offering its cloud-based quantum computing services and miniaturizing quantum processing units (QPUs) using its proprietary "trapped ion" technology. IonQ's stock soared to a record high of $31 shortly after merging, but a combination of financial missteps and escalating interest rates saw its value halve to around $8.
Skeptics were quick to question IonQ's boasts, pointing to concerns over miniaturization, reliance on Honeywell's infrastructure, the use of its AQ (algorithmic qubit) metric instead of quantum volume, and the departure of co-founder and chief scientist Chris Monroe last year. Analysts, however, remain optimistic about IonQ's revenue growth, forecasting a CAGR of 91% from 2023 to 2026, even though this places a steep price tag on the company, with valuations exceeding 40 times current-year sales.
As interest in quantum computing stocks heats up, some investors might be seeking alternative plays. One option could be Rigetti Computing (RGTI -2.00%), another quantum computing firm that merged with a SPAC in March 2022. Rigetti Computing designed and manufactures quantum integrated circuits for quantum computers and operates a cloud platform, Forest, enabling developers to write their own quantum algorithms. Like IonQ, Rigetti's fortunes have been impacted by interest rate hikes, leading to slow revenue growth.
Rigetti's revenue climbed from an estimated $7 million in 2021 to $8 million in 2022, but slipped back to $12 million in 2023 due to the inconsistent timing of government contracts. The company also saw its president and CEO step down at the end of 2022 without giving a reason, driving away many investors. Despite these setbacks, analysts expect Rigetti to generate $65 million in revenue by 2026, representing a CAGR of 76%.
Most of its growth will likely stem from its new Novera QPU, launched in December 2022. Rigetti has already sold Novera QPUs to major U.S. research labs and Horizon Quantum Computing in Singapore. With a market cap of $179 million, Rigetti trades at just over 12 times current-year sales, making it significantly cheaper than IonQ.
While Rigetti's business model is more capital-intensive than IonQ's and relies on customer lock-in, it has several advantages. Rigetti boasts a broader, more diversified product portfolio and measures its computing power in standard qubits rather than alternative metrics. IonQ's capitalization risks and opaque metrics have raised concerns, while Rigetti is seen as offering investors a potentially less risky investment opportunity in the burgeoning quantum computing market.
In the quest for diversified investments in the quantum computing sector, one alternative could be Rigetti Computing, which has a more affordable valuation compared to IonQ despite its capital-intensive business model. With a focus on designing and manufacturing quantum integrated circuits and operating a cloud platform, Rigetti provides a different approach to investing in the finance of this emerging technology.
Investors considering financial opportunities in the world of quantum computing might find value in Rigetti Computing, as its capital-intensive nature is balanced by a broader product portfolio and the use of standard qubits to measure computing power, providing potentially less risky investment prospects.
