Layoffs and the threat of delisting at Rigetti and less-well-publicized cash squeezes elsewhere in the young quantum computing landscape have caused a stir. Hyperion Research today issued a Quick Take acknowledging the unsettled quantum waters but suggesting current conditions are more of a passing storm – quite tough on those caught in it – that will pass.

First, the unavoidable bad news recounted by Hyperion analysts Bob Sorensen, SVP and chief quantum analyst, and Tom Sorensen, associate analyst:

“In early February 2023, pure-play quantum computing (QC) firm Rigetti Computing Inc announced the layoff of 50 employees, 28% of its staff, fueled in part by an effort to stave off a delisting of its stock from the Nasdaq exchange. To avoid that, Rigetti must maintain a per share price of above $1 for ten consecutive days before a July 24th deadline. The announcement, coupled with a reshuffling of both CFO and CTO positions, also highlighted a revised technology roadmap for Rigetti that concentrates on the delivery of its Ankaa 84 qubit system in the first quarter of 2023, with increased 2-qubit gate fidelity, capable of demonstrating quantum advantage on a practical, operationally relevant problem over counterpart classical solutions.”

That can’t be good for Rigetti, and it’s not alone in being battered by macroeconomic winds and investor pressure. Rigetti went public in October 2021 through a merger deal with a special purpose acquisition company, Supernova Partners Acquisition II Ltd, which at that time valued the company at $1.5 billion. Rigetti’s market cap had decreased to about $126 million at the end of trading on the day of the layoff announcement.

In the face of the stormy weather, the Hyperion Quick Take says grab a handrail and hold on:

“Although there has been a growing sentiment within the sector towards a lower chance of an industry-wide quantum winter, that does not necessarily mean that there will not be significant churn within the sector as existing quantum committing suppliers’ fortunes rise and fall due to the vagaries of technology progress, market success, and, increasingly, financial forces; the last of which pure play QC suppliers, like Rigetti, or those that currently lack deep financial pockets, could be most vulnerable.

“Regardless of how this particular realignment turns out for Rigetti, along with similar events that will almost certainly follow for other QC firms, attention must be paid to the effects of this announcement on the QC community, spanning suppliers, end users and investors. If viewed as a bellwether for the QC sector, the impact of this announcement could have a broad and decidedly negative impact on the trajectory of QC development, funding, and ultimately market progress. If viewed instead as a natural and, indeed, typical occurrence for a nascent, technological-leveraged firm where overall sector vitality transcends the fortunes of any single company, this announcement will be acknowledged, and the sector, with all of its constituent participants, will continue on its current trajectory.

“Forces at play that may serve to bolster the latter scenario include strong and continued support from a wide range of US government QC promotion programs supporting direct R&D support, government QC-related R&D transfers to the commercial sector, and strategic domestic QC procurement policies, all mechanisms that can serve as a stabilizing force.”

Opinions vary on the seriousness of current pressure on the quantum industry. One well-connected industry exec told HPCwire he thought several companies were vulnerable and he worried that patent trollers will swoop in and scoop up the IP assets of troubled quantum companies at big discounts and then cause more generalized havoc in the community.

Sorenson doesn’t discount current struggles but sees natural growing pains at work. He told HPCwire, “QC, like any technologically aggressive sector, should be judged not by the fortunes of any individual player. Instead, overall sector vitality, measured by the influx of innovation across the space, is the key metric against which progress should be judged. Currently, the QC sector is replete with a growing set of aspiring and pioneering QC suppliers, which bodes well for the overall prospects of the sector, particularly for the base of QC early adopters eager to explore QC’s performance potential.”

Time will tell.