Quantum computing promises to solve problems beyond classical computers, with potential applications in drug discovery, material design, cybersecurity, and weather forecasting. Several companies are advancing this technology, but practical full-scale systems remain years away.
Pure-play quantum computing stocks like Rigetti Computing (NASDAQ: RGTI) and IonQ (NYSE: IONQ) have seen share prices soar as investors target the sector. However, these companies generate minimal revenue while spending heavily on research and development. Over the past year, Rigetti reported negative free cash flow of $67.6 million, and IonQ's cash burn accelerated to $263.6 million due to aggressive acquisitions.
Both Rigetti and IonQ rely on external funding. In 2025, Rigetti raised $350 million in June, and IonQ raised $2 billion in October through equity issuances. Despite these infusions, based on recent financial results, their cash and cash equivalents cover roughly seven years of cash burn, suggesting they may need more funding before becoming cash-flow-positive.
For investors, this could lead to further dilution of ownership stakes, increasing already high valuations. While one might emerge as a leader, both are considered extremely risky investments.
In contrast, larger tech companies with substantial cash flow, such as Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), can invest in quantum computing without significant financial strain. Alphabet generated $73.5 billion in free cash flow over the last 12 months. Committing $1 billion annually to quantum computing, twice IonQ's cash burn rate, is minor compared to its estimated $92 billion spend on Google Cloud data centers for 2025.
Alphabet has made notable advances in quantum computing. In late 2024, its Willow chip completed a benchmark test in under five minutes, a task estimated to take the world's fastest supercomputers 10 septillion years. Researchers also developed a system where error correction improved as more qubits were added, addressing the instability inherent in qubits.
Willow provides a path to scale quantum computers for practical applications. Last year, Alphabet successfully executed the Quantum Echoes algorithm, demonstrating a quantum advantage. However, these efforts have only produced theoretical advantages so far, with large-scale quantum computers still years away.
When breakthroughs occur, Alphabet is well-positioned to scale and deploy technology due to its capital resources. It can offer systems through Google Cloud, turning theoretical advances into a viable business. Alphabet trades at about 29.5 times earnings, compared to IonQ and Rigetti trading at 91 and 408 times sales, respectively. While pure-play stocks have upside potential, they could become irrelevant over the next decade, whereas Alphabet's long-term presence is more assured.
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