Amazon's NISQY Business: Is Rigetti in the Shopping Cart?

The Case for Acquisition (Amazon)

Firstly, Amazon's old playbook of forking popular open-source software projects and then bundling these into AWS will probably not work under the quantum computing paradigm. To start, although there are quite a few pieces of open-source quantum computing software out there, due to the immature state of the industry, it's not yet clear which of these open-source software dev toolkits will stay relevant in the Noisy Intermediate Scale Quantum (NISQ) era, let alone as we move towards the Fault Tolerant (FT) quantum hardware regime!

Secondly, to achieve a seamless integration with the classical AWS services whilst at the same time have an aggressive pricing strategy à la AWS, Amazon will need to develop its own quantum hardware i.e. the company cannot just rely on special partnerships with existing quantum hardware companies via Amazon Braket.

Thirdly, IBM seems to have learned from their past strategic mistakes regarding cloud computing, whereby the company left it too late to join the cloud infrastructure revolution and as such enabled Amazon, Microsoft and Google to race ahead. Today, IBM's Qiskit developer community is the fastest-growing quantum computing developer community in the world according to our internal research. Moreover, through the following initiatives, IBM has created an organic user acquisition channel for its quantum ecosystem that will be very hard for non-developer oriented incumbents to replicate.

1. Qiskit Global Summer School: The program has attracted thousands of new quantum computing enthusiasts, and more importantly, exposing them to IBM's Qiskit.

2. Qiskit Developer Advocate: The program now has hundreds of people around the world evangelising IBM's Qiskit at local community level. Of course, nowadays everything is being done online, however, as the world of physical meetups open up again, Qiskit meetups are likely to be one of the fastest-growing emerging tech meetups around the globe.

IBM is thinking of quantum enterprise too, with the creation of its IBM Q Network! All these initiatives are driving the organic adoption of IBM’s Quantum Cloud platform. Hence, Amazon, the current leader in classical cloud computing infrastructure, is at serious risk of being outpaced in the NISQ revolution by IBM, Google and probably Microsoft too.

Today, interestingly, IBM announced it was going to spin out its legacy IT business so that the company can focus fully on the cloud!

Can the Acqusition of Rigetti Help?

We recently surveyed software engineers enrolled on Zaiku Group's free mathematical course (Quantum Formalism). Rigetti came second as the most mature and developer-friendly in the category of Superconducting hardware architectures, behind IBM and crucially ahead of Google. In a paper published last year entitled 'Overview and Comparison of Gate Level Quantum Software Platforms', Rigetti's Forrest came across well in the core things that matter to quantum developers in the NISQ era.

Credits: Ryan LaRose, the author of the mentioned article above.

Rigetti could in theory provide Amazon with the foundation to compete with IBM, not just in the NISQ era, but also beyond. This can be done by building upon Rigetti's existing quantum talent and relatively popular developer ecosystem. Ironically, Amazon recently hired John Preskill, the veteran quantum information researcher who coined the term 'NISQ'! Naturally, Prof Preskill does not perform miracles, however, he is likely to work out as a great addition for a company trying to catching up. Similarly, the presence of stars like Prof Preskill may help to bring more top quantum talent to Amazon.

At present, Amazon and other big tech giants are currently under a huge amount of scrutny over M&As. Therefore, it is possible that the current quantum hype in the tech media may make regulators pay additional attention to any proposed quantum acquisition such as Rigetti! However, given that the industry is in such as nasent stage and that there are several hardware architecure alternatives to one deployed by Rigetti (superconducting), Amazon will most likely be able to convince regulators that the competition is very healthy.

The Case for M&A (Rigetti)

Rigetti's executives and investors are certainly aware that we are years away from FT quantum hardware despite the current media hype. Likewise, they are aware that it will require significant R&D investment going forward, not just in the development of FT quantum hardware, but in the NISQ pradigm. To make things even more challenging for Rigetti, other quantum hardware startups seem to be making progress also. Just recently, IonQ, a company using an ION trapped approach to quantum hardware made a PR release that it has achieved '32 perfect qubits with low gate errors.' Indeed, the community still needs to wait for some sort of independent validation of the claim made in the IonQ's announcement. 

Hence, Rigetti will most likely need to raise significant amounts of extra capital over the coming years in order to pursue its full-stack strategy against the likes of IonQ and even other superconducting startups. The question is then, how sustainable will private fundraising be for Rigetti? Will the company decide to test the IPO waters?

Acquisition by Amazon could, however, provide Rigetti with a massive amount of R&D capital and the required distribution power via AWS's existing global developer community. We project that a price tag of $3.6B - $6B could be reasonable for a company in an early stage industry that can unlock so much innovation and revenue potential for Amazon. Even if there is the risk that the superconducting architecture pursued by Rigetti and others may not be the most viable option in the future, a write off of $3.6B - $6B will probably not anger Amazon’s investors too much!

The Potential Rigetti Exit Effects

A $3.6B - $6B exit by Amazon would send a very positive signal to non-deep tech venture capitalists around the world to start investing in early stage quantum hardware and software companies. It may also be the catalyst for consolidation in the quantum hardware space that is becoming a bit too fragmented with the influx of academics leaving universiy positions to start new quantum hardware companies thanks to a massive surge of government backed funding schemes and perhaps over -excited venture capitalists! :)

Disclaimer: Any opinions, newsletters, research, analyses, prices, projections or other information offered by ZAIKU CAPITAL is provided as general market commentary, and does not constitute investment advice. ZAIKU CAPITAL will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.  ZAIKU GROUP LTD.

Research Credits: This post was powered by our amazing quant market intelligence platform team Kähler Insights.