Rigetti Computing stock price has gone vertical in the past few month, helped by the ongoing hype surrounding the quantum computing industry. This growth has pushed it from a penny stock trading below $1 into a $17 billion company.
Why Rigetti stock price is soaring
Rigetti and other companies in the quantum computing industry, like IonQ and D-Wave, have been in a strong surge since 2024. These gains have happened as investors predict that this type of computing will be the next big theme in the technology industry.
The thinking is that investors will start focusing on the quantum computing once the AI theme fades. This view has been supported by reports from top companies like McKinsey and Bain that have predicted that quantum computing will help solve some of the biggest solutions in the world today. This view is supported by top experts in the industry, like Michio Kaku, who have been working in technology for decades.
Rigetti Computing stock price surged on Monday as investors cheered a report by JP Morgan, which said that it would invest at least $10 billion in companies in sectors important to the US economy. This plan is part of the company’s $1.5 trillion strategy known as the ‘Security and Resiliency Initiative.’
On this, it will allocate cash to firms in areas like supply chain and advanced manufacturing, defense and aerospace, energy, and frontier technologies. Quantum computing is one of the frontier technologies. As such, investors believe that Rigetti could be one of the companies that will receive this investment.
RGTI exposes the quantum computing bubble
Still, the main risk that Rigetti Computing stock faces is that the company is exposing the bubble in the quantum computing industry.
A bubble is defined as a situation where companies in a certain industry surge irrationally because of euphoria among market participants rather than strong fundamentals.
In Rigetti’s case, the euphoria is driven by the view that it will become one of the top players in the quantum computing industry. This surge is not supported by any fundamentals, especially now that the company has a market capitalization of over $17 billion.
The most recent results showed that the company made just $1.8 million in the second quarter, down sharply from the $3 billion it made in the same period last year.
Rigetti Computing made $3.2 million in the first six months of the year from $6.1 million in the same period last year.
The average estimate of the 7 analysts tracking the company is that its revenue this year will be $8.13 million, down by 24% from last year. They then expect it to make $21 million next year, a 164% annual surge, helped by the upcoming 100+ qubit chiplet.
Despite this, the company is expected to continue losing substantial sums of money in the long term. It will lose 18 cents per share this year and 16 cents next year. It is hard to justify a $17 billion valuation on a loss/making company with less than $30 million in annual revenue.
The options market also point to more downside for the company with the put-call ratio of 1.06, a sign that there are more put that there are more puts than calls.
Rigetti Computing stock technical analysis
RGTI stock chart | Source: TradingView
The daily timeframe chart shows that the Rigetti stock price has gone parabolic in the past few months. It has now become highly overbought as the Relative Strength Index and the MACD indicators surging to their extreme levels. Highly extreme assets tend to pullback over time.
The stock has remained significantly above the 50-day and 200-day Exponential Moving Averages, meaning that it may go through mean reversion in the coming weeks as investors start to book profits.
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