What’s Driving RGTI Stock Higher?

Despite a 500% rise in a month, the stock price of Rigetti Computing (NASDAQ: RGTI), a quantum computing company, could potentially see much higher levels. Unlike conventional computers that operate using binary bits that can only be either one or zero at any given moment, quantum computers employ qubits that can simultaneously exist in multiple states. This enables quantum computers to perform complex calculations with fundamentally different computational capabilities. This enables quantum computers to process sizable amounts of data and explore countless potential outcomes at once.

The application of quantum computing could range from financial modeling and drug discovery to materials science, among others. However, there is a fundamental challenge in quantum computing space, as an increasing number of errors arise as the system grows in complexity with a higher number of qubits. As with any new futuristic technology, things may be volatile at times. That said, if you want upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

Notably, there have been some advancements lately with Google’s Willow chip and Amazon’s Quantum Embark in the quantum space. This has fueled the rally in the quantum stocks at large, including RGTI stock. Furthermore, a $2.7 billion government funding for quantum computing has boded well for these stocks. Rigetti is favorably placed in the quantum space. Rigetti Computing empowers developers to build and deploy applications utilizing quantum computing resources, positioning the company as a leading player in the emerging quantum computing ecosystem. It has developed a quantum processing unit (QPU) called Novera with 9 qubits, and offers a Quantum Computing as a Service (QCaaS) platform that enables their quantum systems to be seamlessly integrated across various cloud environments. 

While quantum computing shows significant promise, it remains in a developmental stage and is not yet ready for widespread practical implementation across industries. Rigetti currently generates revenue from development contracts with partners. Its focus is on QPUs to generate sales in the long term.

RGTI stock is a high-risk high-growth story, with various factors at play, including technological improvements and costs. The company could potentially sell hundreds of QPUs over the next ten years, which may continue to drive its stock higher in the coming years. As an investor, the bet will be on the future potential of quantum computing and Rigetti’s place in it. 

Looking at its past performance, RGTI stock has been quite volatile when compared to the broader markets. Returns for the stock were -92% in 2022, and 35% in 2023. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

[1] Returns as of 12/17/2024
[2] Cumulative total returns since the end of 2016

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