Classical computing has come a long way, but it still has limitations. Even the most advanced chips can only perform a certain number of operations at once, which is why artificial intelligence (AI) companies are building enormous data centers. More chips equals more processing power.
Quantum systems, like those designed by Rigetti Computing (RGTI 5.05%), use a concept called superposition to simulate several different solutions to a problem at once, so they can process some workloads faster than the world's largest data centers. In theory, quantum computers could lead to major breakthroughs in areas like science and cryptography, creating a significant financial opportunity for companies like Rigetti.
Ark Investment Management was founded by seasoned technology investor Cathie Wood. Each year, the firm releases a new edition of its "Big Ideas" report, which highlights the risks and opportunities across the entire tech industry. In the 2026 version, Ark made a series of claims suggesting commercialization of quantum computing might be much further away than investors think.
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An early leader in the quantum race
Before diving into Ark's claims, let's explore Rigetti Computing, which has become a leader in the quantum industry. Unlike most of its competitors, the company owns a fabrication facility, designed its own programming language called Quil, and even created a cloud computing platform where it rents quantum computing capacity to businesses for a fee.
By owning the entire supply chain, Rigetti can produce its own hardware and software in-house, which means it can release updated systems much faster than other companies. It built the industry's largest multichip quantum computer called Cepheus-1-36Q, which has achieved a very high fidelity of 99.5%.
Traditional computers use bits, which are always in a state of 0 or 1, so they are very simple to read. Quantum computers use qubits that can assume the state of 0 and 1 at the same time (also known as superposition), which is how they can produce simulations from large data sets very quickly. Fidelity measures the accuracy of each quantum operation, so a higher reading means fewer errors, thus making the quantum computer more useful for solving real problems.
A quantum computer with a fidelity of 99.5% will commit an error once every 200 operations, on average, which is still far too many for most use cases. That's why Rigetti's sales are still extremely small, despite its technological progress. The company will report its full-year results for 2025 sometime next month, but it generated just $5.2 million in revenue during the first three quarters of the year (ended Sept. 30). That is a tiny amount of money for a $5 billion company.
On the plus side, Rigetti plans to launch a new 150-qubit quantum computer with a fidelity of 99.7% by the end of 2026, followed by a 1,000-qubit system with 99.8% fidelity sometime in 2027. These systems should generate higher demand.
NASDAQ: RGTI
Key Data Points
Ark's quantum forecast should worry investors
Alphabet (GOOG 1.68%)(GOOGL 1.66%) is the parent company of Google, and it's working on its own quantum systems. As a $3.7 trillion tech giant, it has significantly more resources at its disposal compared to Rigetti and other start-ups.
Based on Ark's research, Alphabet's quantum computers are doubling qubits and reducing error rates by 40% every four years or so, which means they won't be powerful or accurate enough to crack the benchmark public encryption algorithm known as "RSA-2048" until the year 2063. This encryption standard protects the majority of the internet, so breaking it would change the way the entire world thinks about cryptography.
RSA (Rivest-Shamir-Adleman) says a quantum computer with 20 million qubits could crack the algorithm in eight hours. However, keep in mind that most of today's quantum computers can only run for milliseconds at a time due to hardware constraints. Therefore, the industry isn't even close to achieving this milestone.
With that said, Ark believes quantum computers could be useful for cryptographic decryption by the year 2044 if companies can double qubits and reduce error rates by 40% every two years, instead of every four years. As I highlighted earlier, Rigetti could increase qubits by almost seven times while reducing error rates by around 33% between 2026 and 2027 alone.
That is extremely positive, but scaling quantum systems becomes exponentially harder, so the company is unlikely to maintain that rate of progression for long.
Rigetti's valuation creates significant downside risk
Even though Rigetti stock is down by 71% from its record high, it's still sitting on an eye-popping three-year return of 1,550%. But as a $5 billion company with minuscule revenue, its valuation is sky-high and, in my opinion, completely unsustainable.
Rigetti stock is trading at a price-to-sales (P/S) ratio of 617, making it one of the most expensive tech stocks money can buy. For some perspective, AI powerhouse Nvidia (NVDA 1.55%) has a P/S ratio of just 24.
RGTI PS Ratio data by YCharts
Considering it could take decades for quantum computers to achieve acceptable error rates for widespread commercial adoption, it will be a long time before Rigetti brings in enough revenue to justify its current valuation. As a result, I think significantly more downside in its stock price is the likely outcome from here.
