With shares up by 223% year to date, Rigetti Computing (NASDAQ:RGTI) is soaring as Wall Street becomes more interested in quantum computing. While this industry is less flashy than other hype cycles like generative artificial intelligence (AI), it could be just as impactful over the long term. Let's dig deeper to decide if Rigetti is a potential millionaire maker.

What is a quantum computer?

Quantum computers are computers that use quantum mechanics to solve problems much faster than their traditional alternatives. While the industry is still largely in the research and development stage, analysts at McKinsey estimate that it could add $1.3 trillion in value to the economy by 2035. Most of the growth is expected to come from applications like pharmaceutical development and materials science.

The analysts also believe quantum computers could play a role in training AI algorithms and neural networks, which makes this industry an exciting way to get indirect exposure to the red-hot opportunities like large language models (LLMs) or self-driving cars.

In the best-case scenario, Rigetti Computing could be the Nvidia of quantum computing because of its picks-and-shovels business model. Like the legendary chipmaker, Rigetti serves the infrastructure side of this opportunity, building quantum computers and their key hardware components like processors. The company has also developed its Quantum Cloud Services (QCS) platform designed to give clients access to its quantum processors remotely through the cloud.

Rigetti has designed QCS to integrate with traditional computer hardware, making it easier for customers to access the technology. Naturally, this could represent huge cost savings for a client compared to building its own quantum computing capabilities in-house.

Operations are still at an early stage

By going public through a reverse merger with a special-purpose acquisition company (SPAC), Rigetti was able to list at a particularly early stage in its operations. Third-quarter revenue fell 23% year over year to $2.4 million. And while the company generated a gross profit of $1.2 million, it posted an operating loss of $17.3 million after accounting for important outflows like research, development, and office salaries.

It gets worse. Rigetti has spent a whopping $9.7 million on stock-based compensation this year. While this technique can save cash and motivate employees, it dilutes shareholders by increasing the number of shares outstanding and lowering their claims on future earnings or cash flow.

The good news is that the company's cash position remains strong, with around $93 million in cash and liquid investments.

Rigetti should be able to maintain its current cash burn for a few more quarters without relying on outside sources of capital.

What do the next few years have in store for Rigetti?

Rigetti's management seems optimistic for the future. The company continues to improve upon its technology and try to solve the problems associated with quantum computing, such as its fragility to external factors like noise. The company is developing new chip fabrication techniques and plans to introduce new architecture designs next year.

Image source: Getty Images.

All this being said, technology doesn't necessarily pay the bills. Not only are Rigetti's sales not growing, it currently posts more than 7 times more in quarterly losses than it generates in revenue. It is unclear how management can turn around such a financial situation. Like with many SPAC mergers, Rigetti doesn't seem ready for public markets and probably would have made more sense as a privately funded start-up or an experimental division of a larger company that had money to burn.

Investors who want to make millions in the stock market should look elsewhere because the risks of buying Rigetti seem to dramatically outweigh the potential rewards. Shares should be avoided or sold.

Should you invest $1,000 in Rigetti Computing right now?

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Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.