Rigetti Computing (RGTI 2.54%) has caught the eye of many tech investors over the past couple of years as the quantum computing market has taken shape. The company is knee-deep in this market, designing and manufacturing quantum computing units and systems, as well as running a quantum computing platform application development.
Quantum computing hardware and software could be a $170 billion market by 2040, and the enthusiasm around this space has caused Rigetti's share price to surge 588% over the past year. But despite those gains, the company isn't profitable, and sales tumbled 32% in the fourth quarter to $2.3 million.
Rigetti's skyrocketing share price means the stock now has a price-to-sales ratio of 147. That's a staggering valuation, and coupled with the company's losses and falling sales, it's probably best for investors to look elsewhere. Here are two great tech companies to choose from, both tapping into another large tech trend: artificial intelligence.
Image source: Getty Images.
1. Taiwan Semiconductor
Taiwan Semiconductor (TSM +1.04%), also known as TSMC, is currently one of the most important artificial intelligence companies because it manufactures an estimated 90% of all advanced processors and is a critical production partner for AI leaders such as Nvidia.
Technology companies have gone all-in on an AI race, and many of them are spending hundreds of billions of dollars to build huge data centers that will serve as their artificial intelligence foundation for years to come. The ramp-up in spending resulted in TSMC's revenue rising 42% to $25.5 billion and earnings per American Depository Receipts (ADR) popping 60% to $2.12 in the first quarter (which ended March 31).
It's worth mentioning that there are some uncertainties around continued data center spending because of the recent tariff announcements, and TSMC could face potential issues if and when a specific semiconductor tariff is announced.
Still, no other company has such a strong position in AI chipmaking, and not many companies even have the technical capabilities to produce some of the most advanced processors the company makes. Even amid the backdrop of tariffs, Taiwan Semiconductor could still win over the long term, as tech companies are expected to spend an estimated $2 trillion on AI data centers over the next few years.
NYSE: TSM
Key Data Points
2. Microsoft
Microsoft (MSFT 0.28%) was an early mover in AI with its investment in ChatGPT creator OpenAI, and has since integrated the chatbot into many of its services under its Copilot brand. This has helped Microsoft stay on pace with other competitors in the AI software space and expand its potential in new areas like agentic AI.
AI agents, which can work on their own to complete tasks like online shopping or making reservations, could grow into a multitrillion-dollar market over the next few years.
Still, Microsoft's biggest AI opportunity comes from its strong position in cloud computing. Microsoft is the second-largest public cloud company after Amazon, with 21% of the market compared to 30% for its rival. Microsoft has closed that gap significantly over the past few years, as many developers and companies have chosen its Azure platform.
Azure's sales rose 31% in the company's second quarter (which ended Dec. 31), and that demand could increase in the coming years. Goldman Sachs estimates that AI cloud computing sales could reach $2 trillion by 2030.
NASDAQ: MSFT
Key Data Points
Microsoft won't have to wait around to see the benefits of all these AI opportunities, either. The company's annual AI revenue run rate is now $13 billion, a massive 175% increase year-over-year. With Microsoft integrating one of the most advanced AI chatbots into its services and benefiting from the growth of AI cloud services, the company is well-positioned to tap into artificial intelligence for years to come.
Of course, as with buying any stock right now, investors should know that President Trump's tariffs will likely cause more uncertainty in the markets and could cause an economic slowdown. If you have many more years before retirement, you can likely ride out some of the short-term volatility with these companies, but investors closer to retirement may want to look for alternatives outside of the tech space for now.
