Is Rigetti Computing Stock a Buy?

Quantum computing could be the next technology to deliver groundbreaking capabilities, following on the transformative power of artificial intelligence. One of the companies racing to create a scalable quantum computer is Rigetti Computing (NASDAQ: RGTI).

As investors caught on to the potential of quantum computers, Rigetti stock skyrocketed to a 52-week high of $21.42 in January. Since then, several factors, such as recent stock market volatility driven by President Donald Trump's unpredictable tariff plans, caused share prices to slump.

Now, Rigetti stock is down 47% year to date through April 21. Does this create a buy opportunity, or are there reasons to avoid the stock? Let's find out.

Rigetti Computing's technological strengths

The companies pursuing quantum computers use different technologies to produce qubits computing units. Rigetti Computing employs superconducting qubits.

Qubits are akin to a classical computer's bit, but while bits represent either a zero or one, qubits can be both at the same time thanks to the properties of quantum mechanics. This shift from black-and-white to grayscale data allows quantum computers to perform certain calculations far faster than even the world's most powerful digital supercomputers.

One advantage of Rigetti's superconducting qubits is that they use existing semiconductor processes to produce the qubits. This makes the tech easier to scale up. It's also an older, widely used technique, making it a more tried-and-true approach compared to newer methods such as rival IonQ's use of trapped ions.

In addition, the company handles the entire end-to-end process of building a quantum computer. From chip design to manufacturing, and software to operate the system, Rigetti does it all. This makes the firm a one-stop shop for current quantum technology.

Its technological achievements won Rigetti a spot among the handful of businesses selected by the Defense Advanced Research Projects Agency (DARPA), a division of the U.S. Department of Defense, to participate in a multi-year initiative. DARPA assembled quantum computing companies in the hopes of creating a cost-effective quantum computer by 2033.

Today, quantum machines are plagued by challenges. For example, specialized refrigeration equipment is needed to create temperatures colder than outer space to keep the qubits stable enough to perform calculations.

Such issues make today's quantum computers too expensive for widespread adoption. The DARPA program aspires to overcome these challenges to turn quantum computing from "hype to prototype," according to the agency.

Rigetti Computing's business performance

Rigetti's selection for DARPA's project is validation that its tech holds potential for the future of quantum computing. However, the company's business is struggling right now.

Rigetti exited 2024 with $10.8 million in revenue, a drop from 2023's $12 million. Not only did sales fall, but the cost to produce that revenue nearly doubled to $5.1 million. This double whammy contributed to the firm's 2024 net loss of $201 million, up from a $75.1 million net loss in the prior year.

In need of cash to fuel its growth and keep the business running, the company sold more stock to raise funds. This led to net proceeds of $153.3 million, but for shareholders, the downside is that it caused share dilution. In essence, Rigetti is asking investors directly for some extra cash.

Weighing whether to buy Rigetti Computing stock

Quantum computing may hold the promise of powerful computers, yet the technology is still in its early stages. DARPA's project hopes to make widespread quantum machines a possibility, but that's years away. In the meantime, Rigetti Computing must find a way to build up its revenue.

Adding to this challenge, Rigetti competes against other pure-play quantum computing companies, such as IonQ, and large corporations investing in quantum tech. These corporations include Alphabet-owned Google and IBM, both of which also use superconducting qubits.

Another consideration is Rigetti's stock valuation. The price-to-sales (P/S) ratio is commonly used for unprofitable businesses, since the metric measures how much investors are willing to pay for every dollar of revenue. Here's how Rigetti's P/S multiple compares to its competitors'.

Data by YCharts.

Rigetti's price-to-sales ratio dropped substantially from the start of the year, but it remains high relative to the more mature competition. In other words, the stock is expensive.

Add to this the company's falling revenue and rising costs, along with battling larger rivals with deep pockets, such as IBM, and these factors do not make Rigetti Computing a good investment right now.

Watch the company's performance over the next few quarters to see if it can reverse its declining sales. Otherwise, Rigetti Computing's business may be doomed before its quantum technology is ready for widespread adoption.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Robert Izquierdo has positions in Alphabet, International Business Machines, and IonQ. The Motley Fool has positions in and recommends Alphabet and International Business Machines. The Motley Fool has a disclosure policy.