Why Shares of Rigetti Computing Are Soaring Today

Key Points

• Analysts at Needham think momentum in the space is building.

• They see federal programs and a pending bill in Congress as pathways to more funding for the sector.

• 10 stocks we like better than Rigetti Computing ›

Shares of Rigetti Computing (NASDAQ: RGTI) traded nearly 10% higher, as of 10:49 a.m. ET today, after a Wall Street analyst raised his price target on the stock and reiterated a buy rating on the name.

Industry momentum is building

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Needham analyst Quinn Bolton increased his price target on Rigetti by $3 to $18 per share, implying about 15% upside from current levels. Bolton believes there is momentum in the quantum computing sector. He is specifically watching the Defense Advanced Research Projects Agency's (DARPA) Quantum Benchmark Initiative (QBI) and a pending bill in Congress called the Department of Energy Quantum Leadership Act.

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An independent research and development (R&D) agency stashed within the U.S. Department of Defense, DARPA was created in response to the launch of Sputnik in 1957 and works to ensure the country is always prepared to "face a strategic technical surprise." QBI's goal is to determine the plausibility of building a quantum computer with a "computational value" that surpasses its cost by the year 2033. The initiative is currently in stage A.

Meanwhile, the Department of Energy Quantum Leadership Act is a bipartisan bill that would increase R&D in the quantum information space, potentially allocating $2.5 billion over the next five years to research. The bill is currently pending in the Senate and has been referred to the Committee on Energy and Natural Resources.

Lots of excitement around this speculative space

Quantum computing stocks have generated significant buzz over the last year, given the technology's potential to revolutionize society. Rigetti is believed to be one of the leaders in the space.

Still, quantum computers haven't really been commercialized yet and many companies like Rigetti are losing money and generating very little in revenue, while trading at multibillion-dollar market caps. For this reason, I would keep positions smaller and more speculative.

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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.