Wall Street shows patience with quantum computing stocks — for now

By most measures, Rigetti Computing’s (RGTI) Q4 earnings last week contained a few red flags that would normally spook investors.

The quantum computing company posted $2.3 million in revenue for the quarter — a 32% drop from the $3.4 million it reported a year earlier. It also booked a substantial $153 million loss.

And yet, shares of RGTI jumped 9.1% after the earnings report, outpacing the S&P 500. The stock has also surged 109% over the last quarter.

Despite a steep decline in revenue — typically a recipe for a sell-off — investors are showing patience with quantum computing stocks.

That’s because all quantum “pure plays” — companies solely focused on developing and commercializing quantum technology — are still in the early stages.

Rigetti CEO Subodh Kulkarni told Bloomberg Technologies that it will take another four to five years before quantum computers start making a meaningful impact in data centers.

“A steadily emerging pathway”

Rigetti’s goal is to build quantum computers using superconducting qubits that can solve complex problems faster than traditional computers.

The company highlighted in its earnings call that it had entered into a strategic partnership with Quanta Computer (PWR), a Taiwan-based server manufacturer.

This collaboration "is designed to strengthen our position in this flourishing market,” Kulkarni said in a statement.

As part of the deal, Quanta has agreed to invest $35 million in Rigetti through a common stock purchase, pending regulatory approval.

Rigetti also made two sales of its Novera chip in Q4 — one to Montana State University and another to the U.K. government.

Benchmark analyst David Williams remains bullish on Rigetti’s growth potential.

“Overall, we remain encouraged by the company’s continued execution across all areas of the technology platform, with a steadily emerging pathway to achieving quantum advantage,” he wrote.

Meanwhile, TD Cowen analyst Krish Sankar pointed to Rigetti’s fundraising efforts, which have secured enough cash to keep the company running through 2027 — easing investor concerns about its financial runway.

That runway is a critical factor, given that the “debate in the industry is whether the technology is still experimental or if it is ready for commercialization,” Barron’s Tom Taulli reported.

Even Nvidia CEO Jensen Huang has said it could take 15 to 30 years before quantum computers become “very useful.”

While some in the industry dispute that timeline, quantum computing stocks remain a speculative bet because no one thinks large-scale commercialization is happening anytime soon.

Whether it takes five years, as Rigetti’s CEO projects, or 30 years, as Huang suggests, investors will have to wait.

As Seeking Alpha’s Michael Wiggins De Oliveira put it, “The issue with investing in a nascent sector is that it's difficult to know who is going to be the leader in the sector until a lot later.”