Technology is one of the most exciting (and lucrative) sectors in the stock market because of its disruptive potential and scalability. Most recently, hype from generative artificial intelligence (AI) seems to have bled into another subset of computer science called quantum computing -- a technology that promises to dramatically expand computers' problem-solving capabilities.
With shares up by an eye-watering 3,000% over the last 12 months, Rigetti Computing (RGTI 1.76%) is a clear winner in this hype cycle. That said, with a potentially transformational technology like quantum computing, investors should be looking at the long-term story instead of short-term fluctuations.
Let's dig deeper into Rigetti's fundamentals to see how it might hold up over the next decade and beyond.
NASDAQ: RGTI
Key Data Points
What is Rigetti Computing?
Analysts at McKinsey & Company don't think scalable, useful quantum computers will be available until 2040, if not longer. But that extended timeline isn't stopping early movers like Rigetti from diving headfirst into the opportunity. Since its founding in 2013, the company has focused on building the infrastructure needed to support the future industry.
Rigetti runs a full-stack strategy, where it designs and fabricates quantum processing units (QPUs), which are used to create upgradable devices. The company has even made its own programming language called QUIL, designed to help developers write algorithms and interact with its systems through traditional computer hardware via the cloud. Its systems are already available through mainstream cloud computing providers like Amazon Web Services (AWS) and Microsoft Azure.
Rigetti's picks-and-shovels business model will give it exposure to the quantum industry's expansion while avoiding the risks associated with consumer-facing applications. And so far, things seem to be moving in the right direction. In September, the company announced purchase orders for two of its Novera quantum computing systems in a deal worth roughly $5.7 million, with delivery expected in the first half of 2026.
However, these sales are likely experimental. And investors shouldn't take this as a sign that the quantum industry is ready for mainstream adoption. In the meantime, Rigetti's operational health remains lackluster.
Rigetti is burning through cash
Image source: Getty Images.
Rigetti will need much more than a few one-off sales to generate real value for its shareholders. Top-line growth remains choppy to nonexistent, with second-quarter sales actually dropping 42% year over year to $1.8 million. Meanwhile, operating losses are growing consistently (driven by rising research and development costs) and now stand at $19.9 million.
The good news is that with $425.7 million in cash and short-term investments, Rigetti can sustain its losses for years into the future. Furthermore, the stock's recent rally has given it a market cap of $13 billion, which will give management the opportunity to sell more stock at these unusually high prices, reducing the level of equity dilution relative to the amount of cash raised. Rigetti's most recent capital raise was in June and netted the company a whopping $350 million.
What does the next 10 years have in store?
Investors who want to bet on quantum computing should have a 10-to-20-year time frame because the technology is still very far from mainstream acceptance. That timeline puts Rigetti Computing's stock in a challenging position because of its significant and growing operational losses.
Current investors will likely experience immense equity dilution as Rigetti uses the current hype as an opportunity to maximize the cash on its balance sheet. Fundamentals-focused investors should remain patient and wait for the dust to settle before considering a long-term position.
