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Should You Invest $1,000 in Quantum Computing Competitor Rigetti Computing?
Key Points
Quantum computing is an intriguing investment field. There is a significant amount of money pouring into the technology, but it has yet to add tangible value to the economy. This is because it remains a nascent technology working toward commercial viability. Once it reaches that stage, the companies involved could see their stocks skyrocket alongside demand.
Rigetti Computing (NASDAQ: RGTI) is a prominent player in the quantum computing race and a popular pick among investors. However, is now the right time to invest $1,000 into the stock?
Rigetti Computing is a high-risk, high-reward investment
Rigetti Computing is a pure play in the quantum computing investment realm, meaning it's closely tied to quantum computing relevance. This has both benefits and drawbacks.
On the positive side, the company is focused on quantum computing and is investing all its resources into bringing the technology to market. If Rigetti Computing achieves quantum computing relevancy, its stock is primed to soar because it currently has minimal revenue, primarily from research contracts. As a $4 billion business, it has immense potential if it can achieve significant growth.
The downside is the lack of a backup plan. If a competitor surpasses Rigetti in technology, the stock could become obsolete, possibly reaching zero. This risk is compounded by the fact that its only cash sources are research contracts, issuing new shares, or taking on debt, unlike larger competitors like Alphabet, which has significant financial backing.
Investing in Rigetti Computing is risky, but it could yield substantial rewards if successful.
2030 is a key milestone in quantum computing
To justify investing in a risky stock like Rigetti Computing, investors need assurance of an adequate payoff if it succeeds in the quantum computing race. Quantum computing has applications in various fields, such as weather forecasting, logistics, and artificial intelligence (AI), with potential unexplored solutions.
However, widespread adoption is still years away.
Rigetti Computing estimates that the annual value for quantum computing providers will be between $1 billion to $2 billion by 2030, potentially expanding to $15 billion to $30 billion per year by 2040. If Rigetti captures 20% of that market, it could generate $3 billion in annual revenue, offering significant upside given its current valuation of approximately $4 billion.
So, should you invest $1,000 in Rigetti Computing? It depends on your portfolio size. For a $2,000 portfolio, investing $1,000 in Rigetti Computing may not be advisable. However, if your portfolio is $100,000 or more and you believe Rigetti will succeed in the quantum computing race, then it might be worth considering. Due to the substantial risks, diversifying investments across multiple quantum computing companies could be wiser.
By keeping position sizing small, the impact of a stock price drop to zero is limited. However, if a 1% position increases tenfold, it leads to significant portfolio gains.
Should you buy stock in Rigetti Computing right now?
Before you buy stock in Rigetti Computing, consider this:
The Motley Fool Stock Advisor analyst team recently identified what they believe are the 10 best stocks for investors to buy now, and Rigetti Computing was not among them. The selected stocks have the potential for substantial returns in the coming years.
Consider when Netflix and Nvidia were added to the list in the past, yielding significant returns over the years.
This article has been published in fool.com via Yahoo News.
