Rigetti Computing Is Plummeting Today -- Is the Quantum Computing Stock a Buy Right Now?

Key Points

• Rigetti Computing stock is getting hit with strong bearish pressures as inflation-related concerns have come into focus.

• Home Depot says that it will be raising prices on some items as a result of tariffs, which has highlighted broader inflationary dynamics.

• Higher inflation will make it less likely that the Federal Reserve serves up the levels of interest rate cuts that growth investors are looking for.

• 10 stocks we like better than Rigetti Computing ›

Rigetti Computing (NASDAQ: RGTI) stock is seeing a precipitous sell-off in Tuesday's trading. The company's share price was down 8.7% as of 2:45 p.m. ET amid a 0.7% pullback for the S&P 500 (SNPINDEX: ^GSPC) and a 1.5% decline for the Nasdaq Composite (NASDAQINDEX: ^IXIC). The stock had been down as much as 9.6% earlier in the day.

While Rigetti Computing doesn't have any direct connection to the home-improvement retail space, its stock is getting hit with selling pressures today in response to recent comments from Home Depot's management. The retail giant said today that it will be raising prices on some items in its store in response to tariff-related costs, and investors are taking the news as a worrying inflation indicator.

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Is Rigetti Computing stock a buy right now?

The Bureau of Labor Statistics (BLS) issued its July report on Producer Price Index (PPI) inflation last week, and inflation for the period came in much higher than the market had anticipated. Core PPI, which excludes costs from the food and energy categories, rose at a 0.9% rate and far exceeded the average economist forecast's call for inflation of 0.3%.

Given the higher-than-anticipated wholesaler inflation, some investors began raising alarms that accelerating inflation could soon be seen in the consumer-facing economy. Home Depot's recent announcement of price increases due to tariffs seems to support that thesis.

Trading at approximately 605 times this year's expected sales as of this writing, Rigetti Computing has an enormously growth-dependent valuation. Along with general excitement surrounding the quantum computing space, the stock has also benefited from expectations that the Federal Reserve will deliver substantial interest rate cuts in the not-too-distant future.

In addition to last week's PPI report, today's comments from Home Depot highlight the risk that the U.S. will begin to see inflation levels tick upward in the near term. Given Rigetti's speculative outlook and highly growth-dependent valuation, that makes the stock a very risky play right now. While the stock could still go on to be a huge winner over the long term, dynamics connected to inflation and interest rates suggest that investors may be able to wait for a better entry point.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool has a disclosure policy.