Billionaire Ken Griffin, the founder of Citadel Advisors, made some interesting moves in the third quarter by purchasing small positions in Rigetti Computing and D-Wave Quantum. Despite the microscopic stakes, every Wall Street analyst following these companies sees potential upside in their stocks.
Rigetti Computing has distinguished itself through vertical integration and multi-chip architecture. This approach has positioned the company as a leader in the field of superconducting quantum computing. By cooling microscopic superconducting circuits to near absolute zero temperatures, Rigetti creates qubits, the building blocks of quantum information. These qubits have unique properties that enable quantum computers to solve certain problems more efficiently than classical computers.
Additionally, Rigetti’s focus on vertical integration allows for cost efficiencies and tight control over the supply chain. The company not only manufactures quantum processors but also develops the necessary hardware and software infrastructure for cloud-based quantum services. One of Rigetti’s notable achievements is the design of the first multi-chip quantum processor, which could give them a competitive edge in scaling fault-tolerant systems.
On the flip side, the valuation of Rigetti is a cause for concern. With a price-to-sales ratio of 1,080, the stock is trading at levels that are 10 times higher than the most expensive stock in the S&P 500. This valuation may not be sustainable in the long run, leading some experts to predict a significant decline in Rigetti’s share price.
D-Wave Quantum, on the other hand, has carved out a niche in quantum computing by focusing on quantum annealing. While this approach may limit the types of algorithms that can be run on D-Wave systems, they excel at solving optimization problems. Quantum annealers have proven to be useful in certain applications, although their utility is still limited compared to gate-based architectures.
In terms of financials, D-Wave saw a 100% increase in revenue in the third quarter, reaching $3.7 million. However, the company reported a non-GAAP net loss of $18.1 million, offset by stock dilution to maintain cash reserves. D-Wave’s valuation, with a price-to-sales ratio of 325, is also considered unreasonably high given the projected growth rate of the quantum computing market.
While both Rigetti and D-Wave show promise in the quantum computing space, their current valuations may not be justified. Investors should exercise caution and consider waiting for more reasonable entry points before investing in these stocks. As the quantum computing market continues to evolve, it will be interesting to see how these companies navigate the challenges and opportunities in this rapidly growing industry.
