How Rigetti's 2024 Quantum Dreams Turned Into 2025 Nightmares

Shares of Rigetti Computing (NASDAQ: RGTI) fell 48.1% in the first quarter of 2025, according to data from S&P Global Market Intelligence. There was a big dip in January, followed by slower share price cuts over the next two months. After this massive price correction, the quantum computing expert's stock price is still up by 925% in the last six months.

Quantum enthusiasm meets harsh reality

You've probably heard about the Willow chip by now. This interesting piece of quantum computing hardware was developed by an Alphabet team called Google Quantum Computing AI, and it features an effective error-correction system. Its release in December 2024 lit a fire under quantum computing stocks, especially pure-play specialists like Rigetti Computing. Willow's superior performance in a certain performance benchmark sounded like a wake-up call to many investors -- quantum computers suddenly looked ready to break cryptography and draw game-changing conclusions from DNA data any day now.

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You know what they say about jumping to conclusions, though. It's great fun and a wholesome exercise, but it won't help your investment portfolio in the long run.

As it turns out, the benchmark where Willow's performance was massively superior to digital supercomputers was hand-picked to demonstrate that the system was performing actual quantum computing. The chosen statistical problem is easily solved with quantum entanglement methods, but it's very difficult to emulate this process with a traditional computer.

This reality started to sink in when Nvidia (NASDAQ: NVDA) CEO Jensen Huang accelerated Rigetti investors' return to reality. At a tech conference in early January, Huang explained that the Willow breakthrough was kind of an expected step forward in a long and tedious research progress, and he expects truly useful quantum computing systems roughly 20 years in the future.

Quantum stocks reacted to that suggestion like Wile E. Coyote running into a brick wall. Splat! The dream of a very quick quantum computing revolution was over, replaced by a much slower slog over several decades. Where's the fun in that?

Rigetti is running a marathon, not a sprint

In the meantime, Rigetti is fighting for a long-lasting place in the quantum computing revolution and it's not an easy battle. The company collected just $10.8 million in 2024 revenue while the research and development budget ran up to $59.8 million. In other words, the company is burning a lot of cash, and I wouldn't want to own this stock if and when the cash reserves are gone.

Rigetti's price drop should continue in the second quarter of 2025, and probably the second half as well. The $2.25 billion market cap you see today looks far too generous. The company could prove me wrong eventually, but it has a lot of work to do first. This is a speculative bet on an immature technology, and I'm happy to watch Rigetti's growth (or perhaps the lack thereof) from the sidelines.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Anders Bylund has positions in Alphabet and Nvidia. The Motley Fool has positions in and recommends Alphabet and Nvidia. The Motley Fool has a disclosure policy.