Summary

• Rigetti and other quantum stocks went off a cliff when NVDA CEO Jensen Huang suggested good things were very far off into the future.

• Investors need to scrutinize the context of Huang’s remarks and remember what kinds of investments these are… more akin to angel/venture capital situations than conventional companies.

• Within Quantum, Rigetti is the 8-ounce (not 800 pound!) gorilla pushing the superconducting protocol, which is very fast but presents more error challenges.

• Choosing Rigetti’s protocol is analogous to an investor accepting higher risk in exchange for much greater growth prospects… at least as things stand now.

• For those who truly understand what quantum computing investing, Long-term with a capital “L,” I do as I intended before Jensen’s remarks pummeled RGTI stock… I rate it “Buy.”.

Bad Leader Give Wrong Direction

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Preface

IF YOU’RE NEW TO QUANTUM COMPUTING, AND EVEN IF YOU DON’T SEE YOURSELF AS A TEKKIE, PLEASE REFER FIRST TO THE QUANTUM COMPUTING PRIMER SECTION OF MY 1/6/25 IONQ WRITEUP.

It will give you a sense of what quantum computing is about. And it will help you appreciate the differences between the superconducting and ion-trapping protocols.

It should also help you appreciate how embryonic this field is.

If you understand that, you should not have been caught by surprise when Nvidia (NVDA) CEO Jensen Huang remarked at an event that serious use of quantum is likely a long way off:

“If you kind of said 15 years for very useful quantum computers, that would probably be on the early side. If you said 30, it's probably on the late side," said Huang during a question-and-answer session during Nvidia's Consumer Electronics Show Financial Analyst event. "If you picked 20, I think a whole bunch of us would believe it.”

Actually, Huang was just reiterating something he previously said in March 2023… as part of an event in which he was explaining NVDA’s participation in developing quantum.

But quantum stocks plummeted on 1/8/25 after Jensen reiterated his old thoughts.

The onslaught of selling in response to this suggests many who had been holding lacked realistic views. In my 1/6/25 IONQ writeup, I said…

Changes in Wall Street culture is the only reason we’re even looking at this stock. In past generations, this company would likely have still been in the hands of angel investors and/or venture capitalists.

Whether you like or hate the way things are now, we have to accept what I call basement kids (like the young adults still holed up in the parents’ basements) if we want pure emerging growth.

(Emphasis in original.)

Any who read that report and thought I wasn’t serious about the angel/venture-like nature of quantum investing now know… I was completely serious.

I’ll circle back to this later below. For now, let’s get to down to today’s regular agenda, starting with…

Who’s Who in Quantum

When you think of a business gorilla, you usually think big.

Big suggests market dominance. It might even be a monopoly, or at least a near monopoly.

Wikipedia calls these companies 800 Pound Gorillas. It comes from the classic joke:

Q. Where does an 800-pound gorilla sit?

A. Anywhere it wants to.

So which company is the quantum computing gorilla? Objectively, we might say International Business Machines (IBM).

It’s in the field. And it’s been commercial since 2016, when it launched the cloud-based “IBM Quantum Experience.”

Since then, it launched several products that aim to enhance the development of this still embryonic technology.

And with nearly $62 billion in trailing 12-month revenues, its a giant. And it’s a cash-flow geyser. So, unlike its tiny rivals, IBM will survive without continuing injections of new outside capital.

But for investors interested in quantum, IBM ‘s size has a downside.

It’s reputed to have pumped billions into its quantum efforts. But I haven’t found any source that specifies a number.

Quantum isn’t a numerical line item in IBM’s latest earning report. Nor does the word “quantum” even appear in its quarterly earnings release.

Whatever IBM eventually does or doesn’t do in quantum, one thing is clear. There is absolutely no quantum play here for investors. IBM shares will make, or break based on other businesses.

That leaves Rigetti Computing (NASDAQ: RGTI) and its $11.9 million in trailing 12 month revenues (that’s really million, not billion) on the gorilla’s throne.

Financially, RGTI isn’t much better than the other publicly traded quantum plays. Those are IonQ (IONQ) and D-Wave Quantum (QBTS).

But Rigetti’s importance to the investment portion of the quantum world far exceeds its relative financial position.

RGTI is the publicly-traded company quantum play that. stands for the superconducting quantum protocol.

IONQ, an important rival, is about ion-trapping. QBTS is about quantum annealing…That’s a specialized aspect of quantum computing.

(By the way, IBM is in the the superconducting camp. Ditto the much-ballyhooed Alphabet (GOOGL) Willow chip.)

Seeking Alpha is an investing rather than tech-talk site. So, let’s now turn toward our little 8-ounce quantum gorilla and its protocol.

Superconducting Style Quantum Computing

The nomenclature sums it up.

The “…conducting” part of the label harkens back to CMOS (Complementary Metal-Oxide-Semiconductor). Those chips are at the heart of traditional computing.

The “super…” part addresses work at extremely low temperatures that result in “infinite conductivity and zero resistance.”

Investopedia explains that devices based on regular chips…

can display a range of useful properties, such as showing variable resistance, passing current more easily in one direction than the other, and reacting to light and heat.

Superconducting aims to eliminate the resistance. (I’ll defer to technical experts to say whether we get literally zero resistance or something breathtakingly close to that.)

Essentially, though, superconducting (super…conducting) is just that simple.

The complex part is achieving this resistance-free status.

The details are beyond the scope of the article… and possibly my brain. Geeks and wannabe geeks can go further by looking into things like cooper pairs and bosons.

RGTI doesn’t put investors through all that. It explains on page 19 of its latest 10-k:

Achieving the scale of quantum processor needed for practical workloads is perhaps the hardest requirement of all. To address this, we have developed a unique patented and patent-pending multi-chip quantum processor technology. This approach leverages techniques long used in classical computer microprocessors and memory (“RAM”). Our scalable processor architecture enables multiple core processor chips, each having many qubits, within a multi-chip assembly to function cohesively as a single, large quantum computer-without introducing additional error sources, network latency or other overhead. Using our modular chip architecture, larger quantum processors may be constructed by assembling more core processors together.

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In addition to accelerating the pace of scaling, we believe our proprietary modular chip architecture has significant manufacturability and cost benefits. For example, rather than producing large, complex individual chips with 1,000 qubits, we may fabricate 10 chips with 100 qubits each, and use our multi-chip technology to assemble them together to produce a 1,000 qubit quantum processor. This solution makes it much easier to produce large processor chips with high yield. As a result, we believe our modular approach to be fundamentally more manufacturable, predictable, and scalable.

Scaling and modularity are big parts of RGTI’s approach.

scaling tech

RGTI IR

2025 modular roadmap

RGTI IR

It doesn’t take an engineering sensibility to recognize that all this, starting with the basic zero-resistance quality, should mean more speed… lots more speed.

That’s what RGTI claims:

superconducting

RGTI IR

Focus on the first and third rows.

As to the third row, “ns” means nanoseconds (one billionth of a second)… “us” means microseconds (one millionth of a second).

So, 300-500 us translates to 300,000-500,000 ns. Clearly superconducting, taking just 50-1000 ns, is spectacularly faster.

On the first row, RGTI claims this computation uses more qubits.

So, it looks like superconducting is the clear winner.

Or not...

Check my 1/6/25 IONQ report. That company rejects a straightforward qubit count the way investors should refrain from focusing only on return. Just as investors must factor in risk, quantum computing must adjust for error.

We see this in the middle row of the table. RGTI is acknowledging superconducting’s lower fidelity (i.e., greater error).

The differences, 99%-99.5% fidelity versus 99.5%+, seems trivial to us. But compared to traditional computing, with 1 in 1 quintillion (1 followed by 18 zeros) error rates, the quantum rates definitely merit attention.

Conquering error, to the extent feasible, is a big industry issue. And in this, superconducting may start at a disadvantage.

IONQ certainly says so. In advocating for its ion-trapping, it says, on page 7 of its latest 10-K:

Atomic qubits are nature’s qubits: Using atoms as qubits means that every qubit is exactly identical and perfectly quantum. This is why atomic qubits are used in the atomic clocks that do the precise timekeeping for mankind. Many other quantum systems rely upon fabricated qubits, which bring about imprecisions such that no single qubit is exactly the same as any other qubit in the system. For example, every superconducting qubit comes with a different frequency (or must be tuned to a frequency) due to manufacturing imprecision. Overall, we believe that systems relying upon fabrication of their qubits are more susceptible to error.

(Emphasis in original.)

To my lay-person’s mind, supercomputing blows ion-trapping out of the water in terms of speed. But ion-trapping compensates with much greater fidelity (the difference being irrelevant to normal people going through day-to-day life, but vital in the computer world).

I’d love to get the CEOs of RGTI and IONQ on a panel and ask both to debate that! But unless or until the situation is definitively resolved one way or another (assuming it can be)…

I’ll assume there’s going to be a place in the quantum computing world for each.

That would be analogous to what we see in our investment world.

Some of us want to moderate risk even to and sacrifice return. Others are less inhibited by risk and want to reach for the stars when it comes to return.

We’re all correct… as long as we each understand our own circumstances and needs, and decide what’s best for our own situations. Quantum computer users likewise need to choose based on their own particular needs.

RGTI’s Business Model

• (1) Vertical Integration

The company uses the phrase “full stack” to describe itself.

The phrase typically describes software/app development… both user-facing frontend and behind the scenes backend.

The phrase can also describe a business model.

A full-stack startup is a company which develops a technology that can provide the end customer with a product or service that handles the entire value chain of its activity. Apple, Uber, Netflix and Tesla are some of the most prominent examples of full-stack companies.

That’s what RGTI is doing. (Yes, all this sounds a lot like vertical integration.)

RGTI starts with its foundry. It actually makes its own superconducting chips. (These are QPUs, Quantum Processing Units.)

The company sees this as a source of advantage. It also sees this as a barrier to competition.

fab-1

RGTI IR

Control of chipmaking lets RGTI make them in ways that facilitate an important part of its approach… scaling.

According to page 19 of the 10-k…

Achieving the scale of quantum processor needed for practical workloads is perhaps the hardest requirement of all. To address this, we have developed a unique patented and patent-pending multi-chip quantum processor technology. This approach leverages techniques long used in classical computer microprocessors and memory (“RAM”). Our scalable processor architecture enables multiple core processor chips, each having many qubits, within a multi-chip assembly to function cohesively as a single, large quantum computer-without introducing additional error sources, network latency or other overhead. Using our modular chip architecture, larger quantum processors may be constructed by assembling more core processors together…

In addition to accelerating the pace of scaling, we believe our proprietary modular chip architecture has significant manufacturability and cost benefits. For example, rather than producing large, complex individual chips with 1,000 qubits, we may fabricate 10 chips with 100 qubits each, and use our multi-chip technology to assemble them together to produce a 1,000 qubit quantum processor.

RGTI also makes its chips such as to facilitate reprogramming. From page 22 of the 10-k…

Our systems are dynamically reprogrammable. Instructions are streamed into the quantum computer or updated within the execution time of the quantum logic circuit. This allows our machines to effectively run both the hybrid variational algorithms that underpin current use cases and quantum error correction routines in future systems. In a production setting, dynamic reprogrammability translates to higher customer job throughput per unit time. Since many applications are expected to require streamed data processing or error correction, we believe this dynamic reprogrammability is central to unlocking the full market potential of quantum computing systems, especially in comparison to alternative modalities that are unable to implement high speed re-programming.

But that’s just one part of the stack. Here’s the full strategy.

strategic pyramid

RGTI IR

• (2) Multiple Revenue Models

For starters, know that this is a plan, not present reality. Page 19 of the 10-k states…

Currently, we generate the majority of our revenues from technology development contracts with various partners. We believe our longer term business model will be more weighted towards QPU sales and recurring revenues generated from quantum computing systems made accessible via the cloud in the form of QCaaS products.

QCaaS means Quantum Computing as a Service.

This is something RGTI can provide on its own. Or customers will be able to obtain it through established cloud hyperscalers.

RGTI’s Beliefs Regarding the Quantum Market’s Evolution

Neither I, RGTI, nor any other quantum company can stop anyone from freaking out over Jensen Huang’s recent remark on the slow evolution of quantum. I, however, prefer to base my opinions on what RGTI laid out in page 7-8 of its 10k.

• The eQa (Emerging Quantum Advantage) Phase

This phase is characterized by the availability of practical, fully functional and operational quantum computers, whose capabilities do not yet enable them to demonstrate clear performance advantages relative to traditional computers. Currently, our quantum computers are of sufficient scale and capability to be useful in applied research for quantum algorithm development, the exploration of potential applications of quantum computing, and for understanding the skill gaps an organization must resolve in order to be prepared to take advantage of quantum computing capabilities

(Emphasis supplied.)

This describes the very beginning of the development of a business/technology.

Every industry goes through something like that.

In biotech, there’s an ETF dedicated solely to clinical stage companies at analogous stages of development. It’s the Virtus LifeSci Biotech Clinical Trials ETF (BBC). If such an ETF existed for computing hardware, I assume RGTI and the other quantum stocks would be in the portfolio.

As to the current state of the business, RGTI considers…

the eQA phase to have begun four years ago…. (and will) close when there are repeated demonstrations solving practical problems, of substantial commercial or customer value, with a level of performance that is competitive with the best available classical computing performance.

Had Huang simply said the obvious, described what RGTI calls the eQa phase, the stocks probably wouldn’t have imploded on 1/8/25.

• The nQA (Narrow Quantum Advantage) Phase

This is when…

large enterprises and government organizations would increase their investment in quantum computing as the superior computational capabilities of the technology will have progressed from projected to verifiably advantaged for certain applications. In addition to quantum-based research and development, quantum machine learning (“QML”) is likely to emerge as a strong avenue for growth….

• The bQA (Broad Quantum Advantage) Phase

This, according to RGTI…

(will) have begun if and when our quantum computing processing abilities have scaled to the point where they can be used to solve practical problems that would be physically impossible to solve on any classical computer.

Put another way, this will be when the early adopters start making practical use of the technology.

• lFTQC (Large-Scale Fault Tolerant Quantum Computing)

This is the pot of gold at the end of the rainbow. RGTI suggests it will involve “substantially error free operation.”

RGTI also figures it …

requires systems with 10,000 to 1,000,000 physical qubits. We believe our scalable multi-chip architecture paves the way to scale up to these large systems.

We anticipate the beginning of the large-scale fault tolerant phase to be likely at least a decade away.

This is when it will make sense for investors to compare results to estimates and fuss over surprises and revisions. And this is when we’ll be able to legitimately look at things like P/E, EV/Sales, Free Cash Flows, etc.

The Numbers, Such as They Are DuringQuantum’s eQA Market Phase

Despite the fact that conventional, instead of venture/angel-like investing is “likely at least a decade away,” I have to touch certain bases…

Here are the quarterlies.

Q Rev

Analyst Compilation based on Data from Seeking Alpha Earnings and Financials Presentations

Q cEPS

Analyst Compilation based on Data from Seeking Alpha Earnings and Financials Presentations

As RGTI noted, this mainly reflects “technology development contracts.” By the time investors need to seriously look at number, we won’t remember any of this.

Here are some financial statement highlights.

fin st hl

Analyst Compilation based on Data from Seeking Alpha Financial Presentations

This is par for a startup. Revenues are nominal. Income statement margins look whacky. Employee stock options are prominent… which, combined with potential new equity issuance, means big-D Dilution down the road.

The company has cash now. But to survive, it will need more new debt and/or equity. As long as its prospects continue to be seen as credible, the capital markets will oblige.

Risk

There are, of course, the technological and financial risks that are typical of companies like this.

And now, sentiment risk is sharply elevated given how Huang brought timetable questions front and center.

What to do About RGTI Stock

Obviously, conventional fundamental valuation analysis doesn’t apply here.

And don’t count on chart- or-technical analysis to help. Look at how dramatic reactions to unpredictable news flow move RGTI (and other quantum stocks).

price chart

StockCharts.com

So, let’s consider what really matters now, long-term (yes, “long… “) and news flow, and the context in which the latter occurs.

When I first learned of Huang’s recent statement, something jarred in my memory. I thought I recalled having read that NVDA was working with quantum.

I struggled to finding a source.

Google search results are now clogged with references to the current story. But finally, after clicking to page eight of the latest result-set I got, I found what I was looking for.

According to a 3/22/23 venturebeast.com article,

At its annual GTC event, Nvidia announced a partnership with Tel Aviv-based Quantum Machines to create a state-of-the-art architecture for quantum-classical computing.

****

A key player in quantum computing, Nvidia already boasts a long list of offerings that aim to accelerate quantum research, algorithm design, the development and discovery of applications, and tackling the challenge of building quantum integrated supercomputers — thereby taking the first steps to delivering on the promise of quantum computing at an industry level.

With the Nvidia quantum platform, researchers can simulate quantum processors at scale, and with performance far beyond what can be achieved on physical quantum processors today. This will enable them to design and develop better quantum algorithms for the processors of tomorrow. CUDA quantum developers can discover and test integrated quantum classical applications, using CPUs, GPUs, simulated QPS, and physical QPS together, each handling the parts of the workflow it does best.

And now, with the addition of DGX Quantum, customers can deploy tightly integrated quantum classical systems capable of using real-time GPU compute to make error correction, calibration control and hybrid algorithms possible at scale.

And, by the way, even back then, in early 2023…

At GTC, Nvidia CEO Huang noted that “the quantum research community and development community is really vibrant around the world. There are a whole lot of interesting things to go and solve.”

Still, he cautioned that it is “solidly a decade and two decades away to have … broadly useful quantum systems.”

So, Huang, a few days ago, really didn’t say anything new

And even now, Forbes suggests his latest words were very incomplete…

While Huang’s remarks might apply to fully scalable, general-purpose quantum systems, they ignore the tangible value quantum computing is already delivering today.

Quantum computing is no longer an abstract concept confined to physicists or futurists. It’s actively reshaping industries by solving problems classical systems can’t handle. From marketing logistics to predictive analytics, quantum computing is transforming decisionmaking — providing faster, more efficient solutions to some of the most complex challenges businesses face.

By focusing solely on a distant horizon for “very useful” quantum computers, Huang’s perspective risks overlooking the incremental yet impactful progress happening now. Early adopters are already leveraging quantum to optimize logistics, streamline operations and uncover insights at speeds classical systems cannot achieve.

The quantum era isn’t decades away — it’s unfolding in real-time.

Meanwhile, two quantum companies responded to Huang with numerical forecasts. IONQ said, “revenue could approach $1B by 2030.” QBTS said, “fiscal year 2024 bookings will likely top $23M.”

RGTI hasn’t issued a numerical forecast as of this writing. But as discussed above, it published a qualitative explanation of the phases through which it sees the quantum market evolving.

I should also add that some accuse Huang of having an axe to grind.

Investors.com spoke to Gil Luria, Davidson’s head of technology research.

"We believe Mr. Huang's comments may have been somewhat self-serving," Luria told Investor's Business Daily.

****

Luria argued that, on the contrary, quantum computing will be a major trend in tech in as early as five years and poses a serious threat to Nvidia.

"Once quantum computing becomes powerful enough, it will likely replace some of the uses of GPU data centers with a much smaller footprint and much faster computation," Luria said. "That means quantum computing is an existential threat to Nvidia, which it would then want to wish away."

For what it’s worth, I researched the quantum-impact-on-NVDA topic when I started looking into the field. I’m not now prepared to support what Luria said. But I can’t argue against it either.

Obviously, there’s a lot to digest here. And more such words are likely coming down the pike.

Here’s how I translate my thoughts about the stock to the Seeking Alpha rating system:

• “Strong Buy” means I see the stock as being better than the market and I’m bullish about the direction of the market.

• “Buy” means I see the stock as being better than the market but am not confident about the market’s near-term direction.

• “Hold” means I see the stock as moving in line with the market.

• “Sell” means I see the stock as being worse than the market but am not confident about the market’s near-term direction.

• “Strong Sell” means I see the stock as being worse than the market and I’m bearish about the direction of the market.

Before Huang spoke, I intended to give RGTI a Buy rating. That’s the same as what I did for IONQ.

Needless to say, I was going to and still do point out that this would only be for investors who felt themselves able to handle the of nature angel/venture-like stocks. It’s not for those who need to be able to predict the next quarter, or even the next few years.

That doesn’t mean I’m suggesting it’s ok to buy into pure hype. It never is. But the sort of supernormal growth we need to consider for quantum stocks is not aberrant.

Here are some very early revenue numbers for some of today’s well-known giants.

gurufocos #s

gurufocus.com

Notice the variations in how fast they got out of the gate.

Note, too, that Apple (AAPL) didn’t even get to iPhone until way beyond this horizon. And AI was barely, if at all, a gleam in NVDA’s eye early on.

All four of these examples share an important thing in common. Early days investing is not like Warren Buffett’s Berkshire Hathaway (BRK.B) owning Coca Cola (KO), American Express (AXP) or Occidental Petroleum (OXY).

For RGTI and its peers, we need to think differently. This is more like William Miller’s having bought Amazon.com (AMZN) near day one.

Having been willing to say Buy for IONQ on January 6th, before Huang’s latest remarks, I’m certainly not going to say otherwise now, with the quantum stocks trading so much lower.

The same logic applies to how I view RGTI.

Based on all this, I’m rating RGTI as a “Buy.