Rigetti Stock Just Did Something Wall Street Didn’t See Coming

Rigetti Computing is at the epicenter of the peculiar energy surrounding quantum computing stocks this week. After a run that saw the stock rise nearly fifty percent over five trading days, the shares ended Friday at $26.42, up nearly twenty percent in a single session. That’s the kind of move that makes seasoned traders squint twice at their screens for a company that only made $4.4 million in revenue last quarter.

On paper, the catalyst is clear and simple to identify. Rigetti received a $100 million share over three years of the $2 billion package that the Department of Commerce announced on May 21st, which would direct federal funds into quantum and chipmaking companies. In return, the U.S. government now owns stock in the company. Ten years ago, this kind of arrangement would have seemed out of the ordinary, but in semiconductors, state-backed industrial policy has become nearly commonplace, and quantum seems to be the next in line.

The rally begins to make more sense when you consider the larger picture, at least on an emotional level. The same news caused D-Wave to rise by 33%. Information popped 31. Even without a direct grant, IonQ was able to ride the wave. As this develops, it seems as though investors are no longer truly pricing a single company. They are pricing a narrative, a sense that Washington has finally determined who will be important in the upcoming computing race.

The underlying numbers, however, paint a more depressing picture. The market value of Rigetti is currently close to $8.8 billion. According to documents that Barchart cited, it makes about $7 million a year. Nearly $90 million is its trailing operating loss. Depending on how you interpret the quarter, the gross margin is startlingly negative. All of this is not concealed. This is nothing new. When a stock rises this quickly, it’s simply easy to forget.

The Berkeley-based business, which has been led by Subodh Kulkarni since 2022, develops superconducting quantum integrated circuits and manages the Forest cloud platform. Cryostats that cool chips to temperatures lower than deep space are necessary for the work, which is truly difficult physics. You don’t see anything cinematic when you visit one of these labs. All that was visible were tangled cables, metal cylinders, and the soft hum of cooling systems. The drama is not visible. If the promise comes to pass, it won’t be.

The similarities to the early years of Tesla, when skeptics and believers argued past one another for what seemed like an eternity, are difficult to ignore. The technology isn’t commercial, qubit counts are still low, error correction is unresolved, and, as one Motley Fool writer put it, “hundreds of research labs” are vying for the same prize. These are just a few of the many complaints made by those who doubt quantum technology. Opponents argue that fundamental technological advancements seldom appear profitable until they do.

A minor but intriguing twist is added by insider activity. In the past six months, two Rigetti insiders have sold shares, bringing in a total of over $5.4 million. No purchases made by insiders. Executives sell for a variety of reasons, so that doesn’t mean much on its own, but patient investors often ignore this kind of information.

What happens after the headlines fade is another issue. Revenue from products is not immediately generated by government grants. Now that Rigetti has the money to support research for years, it can buy time, which is arguably the most valuable asset a pre-commercial deep-tech company can possess. It’s another matter entirely whether it purchases outcomes.

You get the impression that even buyers are aware that they are early when you watch the after-hours tape settle at $25.86, just off the day’s high. The stock is still 53% below its peak from October of last year. The narrative is far from over. It’s possible that Rigetti establishes itself as a key brand in the evolving computing sector. It’s also possible that the rally ends as fast as it started. As of right now, the market appears to be both hopeful and uncertain, content to wait and see.