This quantum stock is falling, as the path to success looks very expensive

By Christine Ji

Rigetti Computing faces increased costs and competition in the quantum-computing field, potentially making its current valuation unsustainable

Rigetti's stock was extending its recent sharp selloff after a TD Cowen analyst backed away from a bullish call.

Quantum companies have enjoyed a surge of popularity among investors on the promise of developing powerful computing capabilities, far beyond what's currently available, but industry leader Rigetti Computing is finding itself in an increasingly expensive and competitive race.

TD Cowen analyst Krish Sankar downgraded Rigetti's stock (RGTI) to hold from buy on Thursday, arguing that investors may have become overly optimistic about the company. Consensus 2027 estimates are "aggressive relative to revenue opportunities at this juncture," according to Sankar.

Shares of Rigetti sank 7.6% in recent morning trading on Thursday. While the stock has tumbled 73% since closing at a record $56.34 on Oct. 15, it has still rallied 29% over the past 12 months.

Unlike other publicly traded quantum companies such as IonQ (IONQ) and D-Wave Quantum (QBTS), Rigetti distinguishes itself as an integrated systems company that designs and fabricates its own quantum processors.

However, this in-house manufacturing strategy has resulted in elevated costs for Rigetti. Sankar predicts that the company may need to invest more than $300 million in a new facility to boost its chip-fidelity rates to the accuracy level needed for commercial viability. For a company that Sankar estimates has around $525 million of total cash and annual cash outlays of $70 million to $80 million, a new facility would represent a significant financial strain.

More: How quantum computing could become the next frontier in national security

Adding to the pressure is Rigetti's recent exclusion from Stage B of the Defense Advanced Research Projects Agency's Quantum Benchmarking Initiative, a federal program designed to verify whether quantum-computing technologies can reach "utility scale," or produce computational value exceeding their costs, by 2033.

Meanwhile, 11 other companies - including rivals IBM (IBM) and IonQ - were selected to move forward. Stage B participants can receive over $1 million per quarter in funding and, more important, earn name recognition for future programs, Sankar wrote. Rigetti can aim to requalify for Stage B this year if it shows significant improvements in its technology.

"We see balanced risk/reward given premium valuation while it has lagged peers in revenue growth and scaling/fidelity rate metrics," Sankar wrote.

Despite all of these headwinds and the recent stock drop, Rigetti's valuation remains "elevated," Sankar added. The stock trades at roughly 95x estimated 2027 sales, a premium that Sankar finds hard to justify when compared with peers like IonQ and D-Wave, which trade at 36x and 84x sales, respectively.

Wall Street estimates are that Rigetti will earn $55 million in revenue in 2027, according to FactSet, 80% lower than estimates for IonQ and and 35% lower than estimates for D-Wave. TD Cowen's estimate for Rigetti's 2027 revenue is $30 million, significantly lower than consensus projections.

-Christine Ji

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02-12-26 1104ET