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Risks Outweigh Rewards in Rigetti’s Overhyped Quantum Bet

Philip CarterSaturday, May 17, 2025 5:03 am ET

75min read

The recent 23% plunge in Rigetti Computing’s (NASDAQ: RGTI) stock price has sparked speculation about whether this is a buying opportunity or a warning sign. While the company’s advancements in quantum computing—such as modular architectures and government-backed projects—are undeniably impressive, the reality remains stark: Rigetti is a high-risk gamble with no clear path to profitability. Let’s dissect why the risks here far outweigh the rewards.

1. The Quantum Mirage: A Market Timeline That Doesn’t Exist

The quantum computing industry is still in its infancy, with no proven scalable revenue streams. Rigetti’s Q1 2025 revenue of $1.5 million—a 52% decline from $3.05 million in 2024—underscores this reality. The company’s business model relies on selling access to its quantum computers and securing government grants, but even its most optimistic projections hinge on breakthroughs in quantum error correction (QEC) and modular chip scaling—technologies still years from commercial viability.

Consider this: Rigetti’s collaborations with entities like DARPA and the UK Quantum Mission are critical for R&D, but these projects are funded by taxpayers, not customers. The $5.48 million AFOSR grant to study qubit defects, for instance, advances science but does little to build a sustainable revenue engine. Until quantum computers solve real-world problems faster than classical systems at scale—a milestone still decades away—Rigetti’s sales will remain a trickle.

2. A Cash Burn Rate That Defies Optimism

Despite a reported $238 million in cash post-April’s Quanta Computer investment, Rigetti’s financials are deteriorating. Operating losses hit $21.6 million in Q1 2025, driven by $15.46 million in R&D spending alone. The company’s “net income” of $42.6 million is a mirage: it stems from non-cash gains tied to volatile derivative liabilities. In contrast, its cash flow from operations was negative $13.6 million, with another $23.6 million drained by capital expenditures.

At this burn rate, Rigetti’s cash could last less than two years—assuming no further dilution or breakthroughs. Yet, the company is gambling on “utility-scale quantum computing” requiring thousands of qubits, a goal that demands exponential increases in R&D spending. Even a $35 million infusion from Quanta Computer—a manufacturer with no track record in quantum hardware—is a drop in the bucket.

3. A Valuation Detached from Reality

Rigetti’s price-to-sales (P/S) ratio now exceeds 197x, making it one of the most overvalued stocks in tech. For context, even speculative AI unicorns like OpenAI or DeepMind trade at single-digit P/S multiples. The disconnect is staggering: Rigetti’s trailing twelve-month revenue is roughly $6 million, yet its market cap hovers near $250 million. This valuation assumes a multi-billion-dollar quantum computing market will materialize by 2026—an assumption no credible analyst supports.

4. Institutions Are Voting with Their Feet

The sell-off isn’t just retail panic. Institutional investors are fleeing: Millennium Management slashed its Rigetti stake by 80% in early 2025, and other hedge funds have followed suit. This exodus reflects a harsh truth: Rigetti’s story is too speculative for risk-averse capital. The company’s reliance on non-cash accounting gimmicks and government grants is no substitute for a viable business model.

Why This Dip Isn’t a Bargain

Bullish arguments cite Rigetti’s technical breakthroughs, like optical control of qubits or its quantum preconditioning algorithm. But these advances are incremental and years from commercialization. Meanwhile, competitors like IBM and Google are scaling qubit counts faster, while startups like Quantum Computing Inc. (QCI) are monetizing niche applications. Rigetti, by contrast, is stuck in a race it can’t afford to lose.

The 23% drop is not a buying opportunity—it’s a reckoning. Investors are finally pricing in the reality that quantum computing’s “moonshot” timeline may never align with Rigetti’s burn rate. With no clear path to positive cash flow and a valuation rooted in fantasy, this stock is a bet on a future that may never arrive.

Final Verdict: Walk Away

Rigetti’s story is compelling, but its execution is a disaster. The stock’s decline is justified skepticism, not a buying signal. Until the company demonstrates a scalable revenue model, achieves cost discipline, or secures a clear timeline for commercialization, it remains a high-risk, low-reward proposition. For most investors, this is a gamble best left to quantum physicists—not portfolios.

The quantum revolution may still happen. But Rigetti Computing isn’t the vehicle to bet on it.

Harriet Clarfelt’s analysis emphasizes rigorous financial scrutiny over hype. This article is for informational purposes only and not financial advice.

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