We recently compiled a list of the 10 Pump and Dump Stocks Favored by Hedge Funds. In this article, we are going to take a look at where Rigetti Computing, Inc. (NASDAQ:RGTI) stands against the pump and dump stocks.
Pump and dump stocks are typically characterized by high 52-week volatility, often experiencing rapid price surges followed by sharp declines. While the term “pump and dump” carries a negative connotation, it doesn’t necessarily mean the company is of low quality or incapable of delivering long-term returns – it simply refers to the extreme price fluctuations it exhibits. Traders can profit from these stocks by capitalizing on momentum, buying during the early stages of a price surge, and selling before the inevitable decline. However, timing is crucial, as these stocks can reverse quickly. Risk management, liquidity analysis, and understanding market sentiment are key to navigating these trades successfully. Also, readers should remember that positions in such stocks could exhibit pronounced volatility overnight, and day trading is often the preferrable form of dealing with them.
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Hedge funds gain their information edge through a combination of proprietary research, advanced data analytics, high-frequency trading algorithms, and access to exclusive market insights which are often not accessible to regular investors. Unlike traditional investors, many hedge funds are not focused on long-term value but instead engage in short-term speculation and trading. They may exploit pump and dump stocks by identifying momentum in its early stages, riding the price surge, and exiting just before the downturn (often a moment when the stock gains widespread attention). Some hedge funds even take the opposite approach, shorting these stocks as they peak, profiting from the subsequent decline. Their ability to leverage real-time data, options strategies, and market microstructure analysis gives them a significant advantage over retail traders in volatile market conditions. The key takeaway for readers is that finding “pump and dump” stocks with significant hedge fund ownership could offer unique confirmation for potential short-term trading opportunities, as institutional involvement may indicate informed positioning ahead of major price movements.
Pump and dump stocks become increasingly more attractive during times of pronounced market volatility and uncertainty. Though slightly below the early March peak, the volatility index is still significantly above its moving average and reflects February’s weaker-than-expected batch of economic indicators and investor’s concerns about the likely near-term negative impact of Trump 2.0 policies. Many market participants certainly do not like the tariff turmoil and the shotgun approach in reducing the federal workforce and spending. Several reputable research boutiques, such as Yardeni Research, substantially increased their odds of the US economy entering a recession in 2025. Since the US economy and stock markets work in unison, the year-end targets for the US broad market index were lowered as well. Here’s a snippet for a recent publication from Yardeni Research:
“Vertigo is a sensation of spinning or whirling such that the person or their surroundings appear to be moving. The stock market didn’t do much today, but everything else seemed to be spinning. The epicenter of all this vertigo continues to be the White House. More and more economists are increasing their odds of a recession. We raised ours to 35% a week ago. JP Morgan’s economists raised their odds to 40% today.”
With current market valuations still elevated vs. the previous decade, the risk of a broad market meltdown persists, favoring short-term traders and speculators. Another advantage of engaging in pump-and-dump strategies is the potential to generate profits even in bear markets through short selling and the use of options strategies. However, the downside is that high volatility can work both for and against the trader. Therefore, we advise exercising increased caution when engaging in such strategies.
A close up of an engineer typing at a quantum computing station in a modern office space.
Our Methodology
We used Finviz to filter companies that have high 52-week volatility. Then we compared the list with our proprietary database of hedge funds’ holdings, as of Q4 2024 and included in the article the top 10 stocks with the highest hedge fund ownership. It’s important to clarify that calling these companies “pump and dump stocks” does not mean these firms don’t have any solid fundamentals or long-term growth catalysts. We call them pump and dump purely due to their volatility and high risk.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Rigetti Computing, Inc. (NASDAQ:RGTI)
Number of Hedge Fund Holders: 17
Rigetti Computing, Inc. (NASDAQ:RGTI) is a quantum computing company focused on developing and commercializing superconducting quantum processors. It builds and operates quantum computers, integrating them with classical computing systems to provide hybrid quantum-classical solutions. The company offers cloud-based access to its quantum hardware through its Quantum Cloud Services (QCS) platform, targeting applications in machine learning, optimization, and material science. RGTI serves enterprise, government, and research customers, generating revenue through cloud subscriptions, partnerships, and government contracts. Its competitive focus is on scaling quantum processors and improving error correction to advance practical quantum computing. The California-based company ranked tenth on our recent list of 12 Best Multibagger Stocks to Buy in 2025.
Rigetti Computing, Inc. (NASDAQ:RGTI) has embarked on a significant strategic partnership with Quanta Computer Inc., where both companies have pledged investments exceeding $100 million over the next five years to drive advancements and commercialization in superconducting quantum computing. In December 2024, Rigetti introduced its 84-qubit Ankaa-3 system, which incorporates a groundbreaking hardware redesign, delivering improved performance with a median iSWAP gate fidelity of 99.0% and a median fSim gate fidelity of 99.5%. RGTI’s modular architecture, designed for seamless integration across the technology stack, sets it apart in the quantum computing space. To achieve scalability, the company is leveraging a chiplet strategy, with plans to showcase 36 qubits by mid-2025 and more than 100 qubits by year-end, while also striving to halve error rates.
December 2024 marked key commercial milestones for Rigetti Computing, Inc. (NASDAQ:RGTI), including the sale of its first quantum processing unit to Montana State University and an additional Novera system to the UK government. Financially, the company reported Q4 2024 revenue of $2.3 million with a gross margin of 44%. RGTI’s robust cash position of $217.2 million in cash, equivalents, and investments, as of year-end 2024, is anticipated to sustain its operations for the next three years. While management believes that wide-scale commercial applications of quantum computing remain four to five years away, the company continues to prioritize research and development milestones to lay the groundwork for future growth. Looking forward, its focus on technological advancements and strategic collaborations positions it for long-term success in the emerging quantum computing market. With high stock price volatility in the last 52 weeks and 17 hedge funds owning the stock, RGTI is one of the pump and dump stocks favored by hedge funds.
Overall RGTI ranks 8th on our list of the 10 pump and dump stocks favored by hedge funds. While we acknowledge the potential of RGTI as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than RGTI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.