It's usually a bad idea to invest in booming, hype-based stocks because they will probably fall back down to earth unless their rally is based on sustainable fundamentals. With shares down by 41% since the start of 2025, Rigetti Computing (RGTI -0.38%) is an excellent example of this phenomenon.
Let's dig deeper to decide what the next 12 months might have in store for this speculative company.
What is Rigetti Computing?
Founded in 2013, Rigetti Computing is a California-based start-up that aims to pioneer quantum computing. This technology could dramatically expand computer processing speed and power to revolutionize industries including drug discovery and materials science, among others. The company went public through a special purpose acquisition company (SPAC) merger in 2022.
SPACs allow companies to bypass the strict listing requirements of a traditional initial public offering (IPO), allowing less mature businesses to hit the market. Unfortunately, this can lead to poor investor returns. Within one year of listing, Rigetti's share price had already collapsed by over 90%.
However, the floundering stock got a new lease on life on Dec. 9 when tech giant Alphabet announced a new state-of-the-art quantum chip called Willow. According to Google, Willow has a dramatically lower error rate than its predecessors and achieved stunning computational speeds. The company claims that it performed a benchmark task in under five minutes that would take one of today's fastest supercomputers longer than the age of the universe to solve.
A rising tide lifts all boats
Google's breakthrough was taken as a signal that quantum computing may be closer to commercialization than previously expected. Rigetti is an obvious beneficiary of this optimism because its business model is designed to monetize the technology.
The company operates a platform called Rigetti Quantum Cloud Services, which is designed to allow clients to access quantum processing power remotely through the cloud while interfacing with the traditional computer infrastructure. This offering could create significant value for clients that want to access quantum computing but don't have the resources or expertise to build their own system from scratch.
The company also designs and manufactures quantum computing chips at its foundry in Fremont, California, making it a pick-and-shovel play on the industry, similar to Nvidia's role in generative artificial intelligence (AI).
NASDAQ: RGTI
Key Data Points
Is quantum computing ready for prime time?
While it is easy to see why Google's breakthrough had a spillover effect on Rigetti Computing, the market may have overreacted. First and foremost, we don't actually know when quantum computing will be commercially viable. Google CEO Sundar Pichai puts the date at five to ten years away, but this is far from guaranteed in an industry that seemingly has been "just around the corner" for decades.
Image source: Getty Images.
Second, Rigetti is not Google. In fact, the tech giant is its competition, capable of plowing billions into the quantum computing industry, while Rigetti struggles for survival. The smaller company's fourth-quarter earnings highlight its alarming operating conditions.
Fourth-quarter revenue dropped 32% to $2.27 million while operating losses increased 7.5% to $18.49 million. Research and development costs (which totaled $13.66 million) are a big reason for the loss. But Rigetti is in a catch-22 because it can't cut this spending without facing the risk of falling behind in this rapidly developing industry.
Where will Rigetti Computing stock be in one year?
Unfortunately for investors, the company is experiencing what happens when hype runs into reality. Shares got a boost from Google's quantum breakthrough last year, but the excitement won't be enough to sustain Rigetti's value in the face of negative growth and spiraling losses. The stock has already fallen substantially this year, and investors should expect continued downside over the next 12 months.
