Shares of Rigetti Computing (NASDAQ:RGTI) plummeted 5.94% in pre-market trading on Tuesday, extending its recent downward trend as the quantum computing sector faces multiple headwinds. The sharp decline comes in the wake of an analyst downgrade and broader industry concerns, putting pressure on the stock that has seen significant gains earlier this year.

The sell-off was primarily triggered by a downgrade from B. Riley Securities analyst Craig Ellis, who lowered Rigetti's rating to Neutral from Buy. Despite raising the price target to $42 from $35, Ellis cited valuation concerns following the stock's impressive 156% year-to-date gain. The analyst noted that a "significant percentage of long-term commercial success" is already reflected in the current stock price, prompting investors to reassess their positions.

Adding to the pressure on Rigetti's stock are concerns about potential delays in U.S. government funding authorizations resulting from the recent federal government shutdown. This is particularly significant for Rigetti, which relies heavily on government contracts. Furthermore, the quantum computing sector as a whole is facing challenges, with peers like D-Wave Quantum and IonQ also experiencing significant drops. Investor sentiment has shifted as the market reassesses the near-term potential of quantum computing companies in light of their current valuations and profitability challenges. The news of rival quantum computing firm Xanadu eyeing a U.S. listing has also intensified competition fears, contributing to the sector-wide retreat and putting additional downward pressure on Rigetti's stock price.