Similar to artificial intelligence (AI), quantum computing is seen as a big technological disruption in the making that will revolutionize society. Quantum computers will ideally be able to solve complex problems that have stumped classical computers and do so in a much more efficient manner than humans have to this point.
If you were one of the lucky few investors who managed to recognize this a year ago and purchased quantum computing stocks, then your portfolio has likely generated tremendous alpha. Investors continue to bet on this young industry that hasn't generated meaningful revenue or earnings yet, but not every one of these bets will be a winner.
Here's one quantum computing stock that Wall Street analysts think is a glaring buy.
A leader in the space
According to Tipranks, five Wall Street analysts have issued research reports on Rigetti Computing (RGTI +2.59%) over the last three months, and all five rate the company a buy. The average price target of $15 implies about 30% upside over the next 12 months or so.
Image source: Getty Images.
Quantum computing is considered the next advancement for the computer industry that has now ingrained itself everywhere from the modern home to the classroom to the office. While computers use bits, small units of information that process and store data, quantum computers use qubits to try and process the data much faster in order to execute much larger and more complex calculations.
Rigetti has been selling quantum computers to end users for a few years now and is constantly innovating, trying to put out better models. At the end of 2024, the company announced the public launch of its 84-qubit Ankaa-3 system, which cut error rates in half in 2024 to achieve 99% median two-qubit iSWAP gate fidelity, a measure of accuracy. By the end of this year, Rigetti plans to release a quantum computer with over 100 qubits with a reduction in error rates double that achieved in its latest system. The more qubits a quantum computer has, the more powerful the computations it can conduct.
Earlier this year, Alliance Global Partners analyst Brian Kinstlinger noted that Rigetti is one of the "three most advanced quantum computer OEMs (original equipment manufacturers)" along with Alphabet's Google and IBM. Companies like Microsoft and Amazon have only announced quantum chips with eight or nine qubit sizes.
Rigetti has also made some progress toward commercialization. The company's partners and customers include Amazon Web Services (AWS), Standard Chartered, Moody's, the Defense Advanced Research Projects Agency, the Department of Energy, the Air Force Research Laboratory, and the United Kingdom-based National Quantum Computing Centre.
Rigetti has also been awarded several grants. Earlier this year, Quanta, the second-largest contract electronics manufacturer in Taiwan by revenue, invested $35 million in Rigetti, which Kinstingler called "yet another validation" of Rigetti's leadership in the space.
Should you follow Wall Street's advice?
The difficult thing about all quantum computing stocks is that the revenue they are generating is minimal and can be sporadic right now. Most of these companies, which are still basically start-ups, are losing money.
For instance, Rigetti generated about $10.8 million of revenue in 2024 and over a $200 million loss. In the first quarter of the year, Rigetti generated about $1.5 million of revenue and a profit due to non-cash gains from changes in the fair value of its warrant liabilities. However, the company would have put up more losses had it not been for that non-recurring cash gain.
Meanwhile, investor enthusiasm has sent the stock surging 1,097% over the past year (as of June 24) and to a $3.7 billion market cap. Given the big run and massive valuation now, I think investing in Rigetti is still quite risky. I wouldn't recommend anything more than a flyer or a speculative position that you can afford to lose.
