Rigetti (RGTI) Earnings Analysis
Quantum stocks were the next hottest trade after artificial intelligence last year in the technology space, but the rally was completely lost its momentum over the last two quarters.
Names like Rigetti and D-Wave have failed more than 50% from their 12 month highs, likely because investors recognized that the technology is still years away. My recent visit to CES gave me the opportunity to listen to a White House advisor speak, and he stated that quantum funding and attention now is where AI was in 2018…this means there’s a future, but it’s very young.
The names we’re hearing about today may be absolute a decade from now…especially given that companies with massive spending ability are also putting in their efforts into their own quantum solutions (Nvidia, Google, IBM). But this doesn’t necessarily put Rigetti and the smaller names out of business, it may actually help. The reason being is because all of these smaller guys are focused on niche areas in quantum. Rigetti is focused on superconducting‑qubit hardware, its own chip fabrication, and cloud access to its quantum processing units (QPUs). That last focus is similar to what CoreWeave does for GPUs.
While the company has had success, it’s still not scalable to large system architecture, but they are projected to reach 1,000 qubits by end of 2027. As for new sales, the company secured purchase orders for about $5.7 million for their quantum computing systems by an Asian technology manufacturer and another California based startup. The company also signed a $5.8 million networking contract. Lastly, Rigetti announced support for NVIDIA NVQLink…a platform for integration of AI supercomputing with quantum computers.
While all these things sound great, Rigetti remains a speculative company in a very high risk environment. The market has punished high growth / speculative names in recent months, mostly because investors have shifted their focus to “quality names.” That doesn’t make Rigetti a bad buy, just one that could drag on for a long time before it turns around, if it ever does. A few multimillion dollar contracts are impressive, but the company burned nearly $300 million last year. A start-up like this will continue to burn through cash and have a lot of inconsistencies. Its near-term performance is likely catalyst / overall industry based…while long term depends on execution.
Technical analysis:
As of now, there aren’t any clear signals of a reversal. The market is still reading “fear” on the fear & greed scale, which means these speculative names aren’t likely to catch a rally. We provided levels for you above.
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