For the previous few months, investors in the synthetic intelligence (AI) movement have grow to be enamored with a latest opportunity: quantum computing. While quantum computing stocks experienced a fleeting jolt toward the tip of 2024, recent price motion suggests the momentum could also be coming to a halt.
Specifically, shares of Rigetti Computing(NASDAQ: RGTI) are down 50% from prior highs (as of Jan. 17). Is now a great time to buy the dip in Rigetti Computing stock?
Jensen Huang is the CEO of the most important semiconductor company on this planet, Nvidia. Earlier this month, Huang spoke intimately about quantum computing and the role Nvidia is playing in the event of this potentially groundbreaking AI technology.
Within the video below, Huang explains specific use cases surrounding quantum computing, how the technology works, and why Nvidia is playing a very important role in its development.
As you may see within the chart below, shares of Rigetti Computing were on a tear prior to Huang’s discussion in early January. Nonetheless, shortly after his comments, Rigetti stock fell in epic fashion — bottoming out around $6 per share. So, what happened?
Heavy selling activity in stocks isn’t at all times a foul thing. In actual fact, over and over sell-offs are predicated on panic and emotion somewhat than sound financial judgement. Let’s explore if now could be a lucrative time to scoop up shares in certainly one of AI’s next big waves.
Within the charts below, I’ve illustrated trends in Rigetti’s revenue and profitability. Clearly, the corporate isn’t generating much when it comes to revenue — with lower than $12 million in sales during the last 12 months. Furthermore, the graph shows some notable ebbs and flows across Rigetti’s top line — suggesting that its services should not consistently in demand. In a way, these dynamics align with Huang’s view that quantum computing isn’t top of mind for a lot of AI’s major forces straight away.
Perhaps the more vital aspect to indicate in Rigetti’s financial profile is its hefty money burn. While the corporate’s losses have improved, burning $60 million while only generating $12 million in revenue doesn’t exactly encourage confidence.
Given the financial profile above, I would not be surprised if you happen to are able to run for the hills. Nonetheless, if you happen to’re still open to the concept of investing in Rigetti, allow me to explore some valuation trends before I close my argument.
Even with a near-50% drop within the stock, Rigetti Computing still holds a market capitalization of $2.8 billion. Given the corporate is barely generating about $12 million in revenue, this suggests that Rigetti Computing is trading at a price-to-sales (P/S) multiple of 234.
As I explained on this piece about Quantum Computing stock, the continued sell-offs in stocks similar to Rigetti, IonQ, and D-Wave Quantum are very much not opportunities to purchase the dip. All of those stocks are still overbought, despite the looks of a low share price and “low-cost” valuation.
While an investment in Rigetti Computing could carry game-changing upside potential, there isn’t a guarantee that the corporate will even be around in 20 years. In any case, at its current burn rate Rigetti goes to be hard pressed for liquidity sooner somewhat than later seeing as how the corporate only boasts $20 million of money on the balance sheet.
Although the prospects of quantum computing are intriguing, I feel it’s a tricky area to take a position in in the mean time. To me, a stock similar to Rigetti is best left avoided.
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