2 Undervalued Quantum Computing Companies Start to Rally

At the end of 2024 moves in quantum computing technology seemed to arrive at a breakneck pace. The race to develop this promising, game-changing technology only seems to be accelerating. Big tech players have dominated some of the headlines—Alphabet Inc. (NASDAQ: GOOG)e.g. announced in early December its Willow chipthat is able to complete in about five minutes a calculation that would take non-quantum supercomputers an astounding 10 septillion years to complete.

Advancing participants in the quantum space are also striking. Quantum Computing Inc. (NASDAQ: QUBT) announced in mid-December a major contract with NASA. In response, shares of QUBT skyrocketed, rising more than 450% in the last month per December 19. This brings their 1-year same-day total return to a whopping 1,420%.

The excitement over quantum data stocks has also extended to names that are not so 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

You can hardly say that the market have completely overlooked Rigetti in the past year. Shares of this maker of quantum processors are up nearly 585% in the year to December 19, 2024 — a huge pace of growth, though still well behind rival Quantum Computing. Almost 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 paying too much for a company 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.

However, what may convince investors to buy into RGTI stock, even despite its recent rally, is the path to profitability. The firm ended the third quarter with nearly $93 million in cash or equivalents, enough of a cash runway to expand operations while it puts the finishing touches on systems slated for release in 2025. Rigetti’s expected launches in the coming year include both a 36-qubit and a 100-qubit system based on superconducting-qubit technology that utilizes established semiconductor design processes. If these launches land successfully, the recent rally may just be the start of a longer upward trajectory.

Nevertheless, investing 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 compare Rigetti to one well-established large technology company that has a budding quantum computing business.

Arqit: Lots of big developments in 2024

Arqit’s participation in the quantum field is unique: the company provides a cloud-based subscription service for quantum encryption to protect data transmission with high security. Shares rose more than 124% in the year leading up to December 19, 2024.

Arqit’s year was incredibly busy. The firm reported modest revenues of under $300,000 for Financial year 2024which ended on 30 September. However, it appears poised to significantly increase revenue as 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 flow of less than $19 million from the fourth-quarter earnings report. On top of that, the company completed a 25-to-1 reverse stock split in September, the same month it named a new CEO. With all this upheaval at the company, investors will likely be looking for signs of stability heading into the new year.

Arqit’s technology seems to be gaining momentum and interest in contracts is increasing. However, the firm is still using cash at a rapid pace and has so far failed to establish recurring top and bottom line performance sufficient to sustain operations at this pace over the long term. However, investors with a long horizon and a high tolerance for speculative investments may be rewarded for an early interest in this quantum cloud computing company.

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