Rigetti Computing (NASDAQ:RGTI) was one of those under-the-radar quantum computing stocks that went absolutely ballistic toward the end of last year. Riding the wave of market euphoria surrounding advanced computing breakthroughs, the stock skyrocketed an astonishing 1,400% in just over a month.
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Quantum computing has captured investors’ imagination, offering the promise of processing power unlike anything seen before. As this transformative technology gains momentum, the next wave of well-positioned players could be gearing up for another explosive run.
According to Alliance Global analyst Brian Kinstlinger, Rigetti stands out as a frontrunner in the race.
“While there are a number of different modalities for quantum computers including trapped ions and photonics, our understanding is super conducting is orders of magnitude faster than the others. RGTI, Google and IBM are the primary vendors in the super conducting modality,” the analyst explained.
That said, Kinstlinger doesn’t see Google or IBM as direct competitors to Rigetti. While both tech giants have reportedly achieved 99.7% fidelity with 100-150 qubits, it’s unclear if they’ve been able to scale beyond that. Rigetti, on the other hand, reached 99.5% fidelity by the end of last year but has yet to begin scaling its qubits at that level. That said, within 3 years, the company anticipates achieving a narrow quantum advantage and expects commercial adoption of its product in around five years, the same as Google recently indicated.
Management thinks it will be manufacturing 100 qubits with 99.5% median 2-qubit fidelity by mid-2025, and with error correction, Kinstlinger believes this will mark the “beginning of demonstrating quantum advantage.” A key takeaway from the November earnings call revolved around the ability to tile 9-qubit systems without performance degradation, as combining multiple 9-qubit chips will accelerate improvements in fidelity rates for large systems.
So far, the company has successfully tiled two chips, and while moving to four is “not trivial,” the company is confident it will be able to do so. One of the biggest obstacles for superconducting quantum computer developers is scaling beyond 150-200 qubits while maintaining high fidelity rates.
“With tiling, we believe RGTI has the IP to achieve the necessary scaling,” Kinstlinger opined.
The good news for investors is that there could be a near-term catalyst approaching. The DARPA (Defense Advanced Research Projects Agency) – a U.S. government agency that funds innovative technology research – Quantum Benchmarking contract awards are anticipated in February, and Kinstlinger thinks RGTI is “positioned to be one of the winners.”
A DARPA procurement, says the analyst, would be “another validation and could be lucrative in the long-term.”
DARPA’s Quantum Benchmarking Initiative is anticipated to be valued at $300 million over seven years, during which DARPA aims to develop a high-fidelity, error-corrected super-sized qubit system.
“With its improving fidelity rates, tiling advances, and awards from other government research labs in the DoD, we argue RGTI is well positioned to be one of those winners,” says Kinstlinger. Each winner’s solution will undergo a 12-24 month evaluation period before one quantum processing unit (QPU) is chosen for deployment.
With these factors in play, Kinstlinger remains bullish on Rigetti shares, assigning a Buy rating and raising his price target from $5.5 to $15. The new figure suggests the stock will gain 30% over the coming months. (To watch Kinstlinger’s track record, click here)
However, Wall Street’s broader take on RGTI offers something of a conundrum. While the stock enjoys a unanimous Strong Buy consensus from 6 analysts, the $11 average price target implies a ~5% decline over the next year. The big question now is whether analysts will downgrade their ratings or follow Kinstlinger’s lead in revising their targets upward. (See RGTI stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
