Enhanced Artificial Intelligence Investment Option: IonQ outperforms Rigetti Computing
When investors talk about the artificial intelligence (AI) market, they often concentrate on GPU manufacturers like Nvidia, AI software developers like OpenAI, AI-focused cloud giants like Microsoft, and data center and networking chipmakers like Broadcom. Often, they overlook the prospective AI advantages in the budding quantum computing market.
Quantum computers process binary bits of zeros and ones concurrently, whereas traditional computers process those bits sequentially. This fundamental difference allows quantum computers to handle larger volumes of data much faster, albeit at this stage, they are bigger, more expensive, and generate more errors than traditional computers. Therefore, they are not as extensively used in AI applications as high-end data center GPUs.
However, quantum computing companies aim to miniaturize their chips, reduce errors, and lower manufacturing costs over the next few years. They also plan to offer more of their quantum computing power as cloud-based services, which could make them more suitable for demanding AI applications.
Two quantum computing companies that might capitalize on this trend are IonQ and Rigetti Computing. Let's examine which of these pioneers might be a better investment.
The disparities and shared attributes between IonQ and Rigetti
IonQ sells three types of quantum computing systems: Its premium Aria quantum system, its business-oriented Forte system, and its on-premise Forte Enterprise system. It also provides its quantum computing power as a cloud-based service. The company primarily caters to large government clients and universities.
IonQ is also working on a "trapped ion" technology that could potentially reduce the width of a quantum processing unit (QPU) from a few feet to a few inches. This miniaturization process could pave the way for more affordable and powerful quantum computing systems in the future.
However, these efforts took a hit last year when its co-founder and chief scientist Chris Monroe, who had pioneered the trapped ion process, unexpectedly resigned. Yet, IonQ continued to grow post-Monroe's departure by installing more systems, securing new government contracts, and forging new AI partnerships.
Rigetti designs and manufactures its own QPUs and lets developers create their own quantum algorithms on its Forest cloud platform. This end-to-end model makes Rigetti a "full stack" quantum computing company.
Like IonQ, Rigetti also aims to develop cheaper and more scalable QPUs for commercial clients. However, Rigetti's founder, Chad Rigetti, stepped down as its president, CEO, and director in December 2022. This sudden departure was concerning, but Rigetti alleviated those concerns with two major product launches.
Last December, Rigetti launched its Novera QPU, a 9-qubit commercial version of its own quantum computer, priced at $900,000. Several major government and research clients have already ordered these QPUs. Rigetti also recently deployed its first 84-qubit Ankaa-3 system, which is designed to detect more than 99% of its processing errors. It plans to deploy a more powerful 100-qubit system with an even higher error detection rate this year.
Which company has a brighter future?
Both IonQ and Rigetti went public by merging with special purpose acquisition companies (SPACs), and they fell short of their pre-merger targets. IonQ generated $22 million in revenue in 2023, compared to its target of $34 million. Rigetti earned $12 million in revenue in 2023, which also missed its original guidance of $34 million.
Yet, both stocks reached their all-time highs in December 2024, as investors praised their recent progress. From 2023 to 2026, analysts expect IonQ's revenue to grow at a CAGR of 89% to $148 million, and for Rigetti's revenue to increase at a CAGR of 43% to $35 million.
Both companies are expected to remain unprofitable for the foreseeable future. IonQ and Rigetti could also continue diluting their shares to raise capital and cover their stock-based compensation expenses. IonQ has only increased its share count by 10% since its SPAC merger, while Rigetti has inflated its share count by 69% since its debut.
Both stocks are expensive. With an enterprise value of $8.8 billion, IonQ already trades at 59 times its estimated sales for 2026. Rigetti's enterprise value of $4.3 billion is equivalent to a staggering 123 times its projected sales for 2026.
The better buy: IonQ
The quantum computing market could still expand at a CAGR of 34.8% from 2024 to 2032, according to Fortune Business Insights, with smaller chips and more efficient error detection rates. IonQ and Rigetti could benefit from this secular expansion, but investors should be mindful of their sky-high valuations. I wouldn't rush to buy either of these speculative stocks, but IonQ's greater scale, higher growth rates, less dilution, and lower valuation make it a better buy than Rigetti at this time.
After discussing the potential of quantum computing companies IonQ and Rigetti in the rapidly growing AI market, some investors might consider investing in these stocks. Given IonQ's achievements, such as its Trapped Ion technology and partnerships with large organizations, it could potentially offer higher returns in the future. Moreover, IonQ's comparatively lower valuation and expected revenue growth might make it a more attractive investment opportunity in the field of quantum computing and finance.
