Even as much of the technology investing hype of 2021 and early 2022 has burned off, quantum computing remains a frontier that excites many investors. Look no further than start-up IonQ (IONQ 9.66%). Shares of the small company are up more than 350% so far in 2023, valuing the business at a market cap of $3 billion. This run-up includes a sell-off from the recent peak. That's remarkable, given that IonQ still generates little in the way of revenue, let alone profit. 

Nevertheless, the promise of future computing acceleration (beyond the boundaries of even what Nvidia's powerful AI systems are performing today) has many thinking IonQ is a buy-the-dip candidate. But is it really?

Looking beyond the hype

IonQ went public in 2021 via a special purpose acquisition company (SPAC). At the time, many investors latched on to the fact that notable investors included Bill Gates, Salesforce CEO Marc Benioff, and Michael Dell of Dell fame. However, as of today, none of these tech heavy hitters ranks among IonQ's top shareholders. Interestingly, though, Amazon does own about 1.4% of the company's shares, no doubt because of its AWS cloud infrastructure partnership with IonQ. IonQ's computers can also be accessed via cloud services Microsoft's Azure and Alphabet's Google Cloud.

But what big institutions are doing with their cash is not a reason for small retail investors to make a buy. Neither is hype around the future promise of quantum computing itself. In various discussions with researchers in this field, most have told me we are still at least a decade from when quantum computing will be ready for mainstream commercial adoption. 

Of chief concern at this juncture should be what kind of company -- with a $3 billion market cap valuation -- investors are betting on. To help figure that out, look no further than the second-quarter 2023 earnings results. Quarterly revenue was just $5.5 million, and full-year 2023 expected revenue is a meager $19.1 million at the midpoint.

IonQ has already reported $71 million in generally accepted accounting principles (GAAP) net losses in the first half of 2023 and negative free cash flow of $34 million.

The market seems to be ignoring the fact that this is a very early-stage start-up. IonQ is not a stock for the vast majority of small retail investors. 

A promising start-up, or one that lacks substance?

There are some positives. IonQ reported that it has received over $32 million in customer bookings for future services so far in 2023. That at least gives an indication as to where future revenue is headed. But it's still not enough to justify the $3 billion market cap. 

Additionally, the company is well funded from that 2021 SPAC IPO. As of the end of June, it had $376 million in cash and short-term investments, $134 million in long-term investments, and no debt.  

However, IonQ's customers are researchers and this gives me pause. For example, it recently announced a $25.5 million commitment from the U.S. Air Force Research Lab. A big, sustainable business that relies almost solely on research dollars, much of those funded by the U.S. and other governments, isn't really possible. Congress passed the $1.2 billion Quantum Computing Bill in 2018, and a Quantum Computing Cybersecurity Act was passed in late 2022, and funding like this gets gobbled up quickly, especially by big companies and institutions involved in researching quantum computing.

IonQ has had a steady beat of positive news on progress made with its quantum computers, but the reality is that this is still a start-up that loses money -- and this situation is likely to persist for years to come. Most investors should steer clear of IonQ stock right now, especially at this elevated valuation. The stock has dipped from highs, but that certainly doesn't make it a great buy. Instead, I believe most investors should find contentment in owning big tech stocks, nearly all of which are involved with quantum computer development at this point.