Down Almost 30%, Should You Buy the Dip on Rigetti Computing?

Key Points

• Rigetti Computing aims to be a leader in the promising quantum computing industry.

• For the time being, this is a highly speculative, pre-revenue business.

• Even though it’s cheaper than it was a few months ago, this is a stock with a very binary outcome, so invest accordingly.

• 10 stocks we like better than Rigetti Computing ›

Rigetti Computing (NASDAQ: RGTI) has been one of the best-performing and most volatile stocks in recent history. Over the past year, Rigetti shares have gained about 1,400% as quantum computing hype has accelerated. However, since peaking in January of this year, the stock price has been rather volatile, plunging by as much as 70% from the peak before rebounding.

As of this writing, Rigetti is trading for about 30% below its all-time high. With quantum computing still in the early stages and Rigetti trying to establish a leading position before the technology goes mainstream, is now a smart time for patient investors to take a closer look?

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Impressive progress so far

The basic idea is behind quantum computing is that the use of traditional bits of information create an upper limit on the performance of traditional computers. By using "qubits," which can be in many different states simultaneously, the idea is that quantum computers could be several orders of magnitude faster than traditional computers and therefore could solve problems much more efficiently. In theory, a quantum computer could solve a problem in seconds that would take a traditional computer years. However, the key phrase is "in theory."

Image source: Getty Images.

Rigetti has some of the more impressive quantum computing achievements so far. The business goal is to build quantum computing systems that customers can access remotely through the cloud.

So far, Rigetti has 237 issued or pending patents on its technology and has started to gain early-stage commercial traction through partnerships with governments and other customers. Just to name a few achievements so far:

• The company launched its first 32-qubit system on Amazon Web Services (AWS) in 2019.
• Rigetti demonstrated its first scalable quantum chip in 2021.
• The Aspen quantum computer became commercially available on AWS in 2022.
• The company's first quantum processing unit became commercially available in 2023.

Is Rigetti Computing a buy?

Of course, Rigetti Computing is more attractively valued than it was in January when it reached an all-time high, but this is not a cheap stock by any definition. Its current stock price gives a market cap of about $5 billion, and while Rigetti has generated some sales from things like prototypes and experimental products, but this is mostly a pre-revenue company.

Long-term, Rigetti sees a massive market for quantum computing. While it believes the market will be in the $1 billion to $2 billion range by 2030, it believes that's around when the technology will start to become mainstream, creating a $15 billion to $30 billion market opportunity during the 2030s and growing to well over $100 billion by 2024.

Now, there's a lot that needs to go well for the company, and the industry in general, for these market estimates to become reality. And there's also a lot that can go wrong, even if quantum computing does become the next big thing.

For example, Rigetti has enough cash to fund its development for now but could need to raise additional capital and dilute shareholders. Plus, Rigetti isn't the only company that wants to be an early leader in quantum computing, and it isn't just startups -- some big players like Alphabet's (NASDAQ: GOOGL) (NASDAQ: GOOG) Google are developing quantum computing technology as well.

The bottom line is that if quantum computing proves to be a viable mainstream technology, and Rigetti maintains a technology lead over competitors, this stock could be a home run for patient investors. But it could also go to zero if things don't go well. Keep this in mind when investing. It would be wise to only invest money you can afford to lose if things don't work out.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.