At the end of 2024, advances in quantum computing technology seemed to arrive at a dizzying pace. The race to develop this promising, game-changing technology seems to only be speeding up. Major tech players have dominated some of the headlines—Alphabet Inc. (NASDAQ: GOOG), for example, announced in early December its Willow chip, capable of completing in about five minutes a computation that would take non-quantum supercomputers an astonishing 10 septillion years to finish.
Up-and-coming participants in the quantum space are also making a splash. Quantum Computing Inc. (NASDAQ: QUBT) announced in mid-December a major contract with NASA. In response, shares of QUBT skyrocketed, climbing by more than 450% in the last month as of December 19. This brings their 1-year total return as of the same day to a whopping 1,420%.
The excitement over quantum computing stocks has also extended to names that are not as well known. Two companies in particular—Rigetti Computing Inc. (NASDAQ: RGTI) and Arqit Quantum Inc. (NASDAQ: ARQQ)—may be worth keeping in mind for investors looking to deepen their exposure to this fast-growing industry.
Rigetti: Cash Runway Toward Profitability, But Risky
One can hardly say that the market has entirely overlooked Rigetti in the past year. Shares of this maker of quantum processors are up nearly 585% in the year through December 19, 2024—a tremendous pace of growth, though still far behind rival Quantum Computing. Nearly all of these gains have taken place in the final weeks of the year.
On paper, Rigetti's recent rally appears to have catapulted the company into overvalued territory. Its P/S ratio of 172.9 suggests that investors may be overpaying for a firm that has yet to see sales take off. Further, the company is not yet profitable—it reported a net loss of more than $14 million for the third quarter.
What may convince investors to buy into RGTI shares even despite their recent spike, though, is its path to profitability. The firm ended the third quarter with almost $93 million in cash or equivalents, enough of a cash runway to extend operations while it puts the final touches on systems slated for release in 2025. Rigetti's anticipated launches in the coming year include both a 36-qubit and a 100-qubit system based on superconducting-qubit technology that harnesses established semiconductor design processes. If these launches land successfully, the recent rally may be only the start of a longer upward trajectory.
Nonetheless, an investment in Rigetti while the share price is so high and before the company achieves profitability is inherently risky. More cautious investors may be better off comparing Rigetti to a well-established large tech firm that has an emerging quantum computing business.
Arqit: Lots of Major Developments in 2024
Arqit's participation in the quantum space is unique: the firm provides a cloud-based quantum encryption subscription service to protect high-security data transmission. Shares are up more than 124% in the year leading to December 19, 2024.
Arqit's year was incredibly busy. The firm reported modest revenue of under $300,000 for the 2024 fiscal year, which ended September 30. However, it appears poised to grow revenue significantly, given that the company recently finalized a multi-year contract with an unnamed government in the EMEA region. It is expected to generate annual recurring revenue in the seven-figure range.
The company has introduced cost-cutting measures to help it reduce the impact on its modest cash position of under $19 million as of the fourth-quarter earnings report. On top of that, the company completed a 25-for-1 reverse share split in September, the same month in which it appointed a new CEO. With all of this upheaval at the company, investors will likely watch for signs of stability going into the new year.
Arqit's technology appears to be taking off, and interest in contracts is growing. However, the firm still spends cash at a fast rate and has so far failed to establish recurring top- and bottom-line performance sufficient to sustain operations at this pace for the long haul. Investors with a long horizon and a high tolerance for speculative investments, however, may be rewarded for an early interest in this quantum cloud computing company.