Is This Quantum Stock Set To Keep Soaring?

Following comments by NVIDIA CEO Jensen Huang about the probable timeline for practical quantum computing, quantum startups have had a rocky start to 2025.

Huang, himself an expert in cutting-edge computing technologies, said he believed that it could take about 20 years for quantum computers to become a useful technology.

While the comment attracted criticism from some technologists and quantum bulls, the market as a whole took Huang at his word and started selling off the stocks of young quantum computing companies.

One of the stocks affected by Huang’s comments was Rigetti Computing (NASDAQ:RGTI), which saw its shares fall more than 50 percent off of their record highs. Though the stock has since regained some of the ground it lost, Rigetti is still beaten down and has attracted a great deal of investor interest despite having gone public only a couple of months ago. Is this volatile quantum stock a high potential candidate still or have all the gains been baked in?

Key Points

• Jensen Huang’s prediction of a 20-year timeline for practical quantum computing triggered a selloff in quantum stocks, including Rigetti Computing.
• Rigetti’s innovative qubit technology and new chip launches have driven modest revenue but flat growth, with high valuation multiples.
• Rigetti’s rapid share dilution and uncertain timelines for quantum computing making it a risky investment.

What’s the Bull Case for Rigetti Computing?

Rigetti Computing has a different approach to qubit technology than most and instead uses superconducting qubits from existing semiconductor manufacturing technologies.

The result is scalable quantum computing chips that combine high speeds and low latency rates. So far, the company has rolled out its flagship Ankaa-3 chip that features 84 qubits, a meaningful but not too distant achievement relative to the 105-qubit Willow Chip that Alphabet launched around the same time.

The milestone led to a revenue pop with Q3 total revenues of $2.4 million albeit, this was a slight decline versus the $3.1 million in the year-ago quarter.

Management has announced that Rigetti is on track to release several new upgrades to its quantum computing hardware in 2025. Among these is a 100-qubit system as well as a 336-qubit quantum computer called Lyra, though this may not debut for some time.

It’s no mean feat for a quantum computing firm to get sufficiently far as to generate revenues so Rigetti earns the plaudits in this regard. A recent report by McKinsey & Company, a prominent management consulting firm, suggests that quantum computing could unlock $2 trillion or more of value in the next decade alone. With such high growth on the table, it’s far from difficult to see why investors are drawn to companies like Rigetti that are staking out early claims in the quantum field.

Is Rigetti Computing Overvalued?

Although Rigetti has achieved some impressive technological feats and has successfully started generating revenue from quantum computing, the stock still looks extremely expensive. RGTI shares trade at 192x sales and about 22x book value, even after the selloff the stock experienced in the wake of Huang’s comments.

While fast-growing companies can sometimes justify unusually high valuations, Rigetti’s revenues have been largely flat during its brief publicly reported history. Given that the company posted an operating loss of $17.3 million in Q3 alone and is only sitting on a cash reserve of about $20.3 million with an additional $72.3 million in investments available for sale, investors may need to see substantial revenue growth to begin shoring up the company’s financial position.

Analysts price forecasts also suggest that Rigetti Computing has gotten far ahead of its expected 12-month price forecast.

The average price target for RGTI over the next 12 months is $6.10 per share, less than half of its current price of $13.98.

Even the highest standing price target is only $12, indicating that the anticipated best-case scenario for Rigetti computing would still leave the stock significantly overvalued.

Is Now the Time to Buy RGTI?

Rigetti Computing seems to be trading at frothy multiples and much of the run-up can be attributed to extremes in bullish sentiment.

Absent a higher revenue growth rate, it’s hard to justify the current valuation multiples. It seems clear that a market that can chop valuations in half in a matter of days on the back of a single CEO’s comments is too frothy.

There’s also the small matter of diluting existing shareholders at a rapid pace. For example, Rigetti is issuing new shares at a rapid rate, eroding the ownership positions of its existing shareholders. Q3 saw the number of outstanding RGTI balloon by over 40%. If the Board of Directors keeps pumping out new shares so quickly with the existing shares already seemingly overpriced, the risks of RGTI’s valuation will only become more pronounced.

We can’t dismiss either the fact that Jensen Huang may well be right about the timeline for practical quantum computing. Although extremely powerful, quantum computers have a huge set of challenges standing between them and large-scale commercial viability. If nearly two decades really do stand between us and viable quantum computing, paying high prices for a quantum startup now has all the hallmarks of negative expectancy due to the high probability of roadblocks up ahead.

For prospective buyers, the momentum in the quantum space needs to be respected because it’s been a one way train for a few quarters but appeared to stop on a dime when Jensen Huang poured cold water on the idea of any imminently disruptive changes from the technology.

Evidence of the froth in the market is that, since its IPO in November of last year, the stock has skyrocketed from about $1.50 to nearly $14 per share. This sudden run-up has been good for investors who bought early and held on through the volatility, but know that the music may well stop playing if another thunderbolt hits the sector.