Over the next few decades, quantum computers could replace classical computers for specific computing tasks. Unlike classical computers, which store data separately in binary bits of zeros and ones, quantum computers store them simultaneously in qubits. That difference allows them to process large amounts of data at a much faster rate than their classical counterparts.
From 2024 to 2030, the global quantum computing market could expand at a CAGR of 20.5%, according to Grand View Research. That early growth should be driven by the expansion of the quantum computing ecosystem as more start-ups enter the market. Those growth rates could accelerate over the following years as those early movers expand their nascent businesses.
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Two of those early movers are IonQ (IONQ 2.23%) and Rigetti Computing (RGTI 3.47%). Both of these quantum stocks are volatile and richly valued relative to their near-term growth; however, which one offers more upside potential for long-term investors?
The differences between IonQ and Rigetti
Quantum computers are more powerful than classical computers for specific tasks, but they're also larger, more expensive, consume more electricity, and output a higher percentage of errors. That's why they're still mainly used for niche research projects at universities and government institutions, rather than mainstream computing applications.
To address those weaknesses, the first quantum computing companies are exploring different ways to achieve quantum states through cheaper, more scalable, and more accurate technologies. To process that data, IonQ uses delicate lasers to "trap" ions in a quantum state, while Rigetti speeds up electrons through "superconducting loops".
Rigetti's electron-driven systems must be cryogenically chilled, which increases their size and long-term operating costs. IonQ's systems don't require refrigeration, but highly trained experts must constantly recalibrate their lasers. Electron-driven systems are cheaper and more scalable, but ion-driven systems can filter out more errors with their higher fidelity rates.
NYSE: IONQ
Key Data Points
IonQ produces four types of quantum systems: its older Aria system, its flagship Forte system, its data center-oriented Forte Enterprise system, and its upcoming Tempo system. It also serves up its own quantum computing power as a cloud-based service.
Rigetti develops modular and non-modular quantum processing units (QPUs). Its modular Novera QPUs can be chained together to increase the processing power of a single quantum system. It operates two central quantum systems: Ankaa-3, which runs on a single powerful chip; and Cepheus-1-36Q, which chains together four of its modular QPUs. It also allows developers to create their own quantum algorithms on its Forest cloud computing platform.
NASDAQ: RGTI
Key Data Points
IonQ faces fewer direct competitors in the ion system market than Rigetti, which faces significant competition from other electron-driven quantum computing giants, including IBM (IBM 1.57%) and Alphabet's (GOOG +0.30%) (GOOGL +0.25%) Google. However, Rigetti's systems are compatible with a wide range of cloud computing platforms -- which makes them attractive to companies that don't want to tether themselves to a tech giant like IBM or Google.
Which company has a brighter future?
From 2024 to 2027, analysts expect IonQ's revenue to grow at a CAGR of 94% to $316 million. That growth should be driven by its new government contracts, the rollout of its newest Tempo systems, and the improving speed and accuracy of its cloud-based quantum services.
IonQ measures its computing power with a proprietary metric called algorithmic qubits (AQ). It expects that figure to surge from 64-100 AQ this year to 2 million AQ by 2030. But as it lays down the foundations for that aggressive expansion, its net losses should continue to widen.
From 2024 to 2027, analysts expect Rigetti's revenue to grow at a CAGR of 63% to $47 million. Unlike IonQ, it measures its computing power in traditional qubits. Its newest Ankaa-3 system runs on 84 qubits, and it plans to deploy its 100+ qubit system by the end of 2025, a 150+ qubit system by the end of 2026, and a 1,000+ qubit system by the end of 2027. Analysts expect it to gradually narrow its net losses over the next two years.
Neither stock is cheap. With a market cap of $17.6 billion, IonQ already trades at 56 times its projected 2027 sales. Rigetti, which is valued at $7.9 billion, trades at 168 times its 2027 sales.
The better buy: IonQ
IonQ and Rigetti are both speculative stocks, and they could easily be cut in half during a market downturn and still be considered overvalued. But if I had to choose one right now, I'd stick with IonQ because it's bigger, growing faster, has a wider moat, and trades at a lower price-to-sales ratio than Rigetti. Rigetti's roadmap is promising, but it may struggle to grow into its valuation and keep pace with its larger rivals in the quantum computing market.
