Artificial intelligence (AI) made a huge splash in 2023, and the next wave of computing to drive AI's evolution could involve quantum computers. Quantum computing is an entirely new way for computers to operate.
These machines use atomic particles, such as electrons and ions, to execute calculations instead of the binary system of zeroes and ones employed by today's computers. This approach allows quantum computers to process mountains of complex data at a scale impossible for any conventional computer. Quantum computers are so powerful they can make obsolete many of the cybersecurity measures currently available. This is why organizations worldwide are working to implement quantum computing.
Two companies developing this tech are veteran IBM (IBM +1.71%) and newcomer IonQ (IONQ +7.07%). Owning either stock gives you exposure to the exciting technology of quantum computing, but since the field is still nascent, is one of these a better choice over the long haul as quantum computing ramps up? Let's look at each company to see whether there's a clear choice.
The case for IonQ
NYSE: IONQ
Key Data Points
In 2021, IonQ became the first publicly traded business solely focused on quantum computing. In its brief history as a public company, IonQ has experienced rapidly rising revenue. For instance, third-quarter sales increased 122% year over year to $6.1 million.
The company anticipates this sales growth to continue and expects to notch at least $21.2 million in revenue in 2023, up from 2022's $11.1 million.
In Q3, IonQ secured $26.3 million in new bookings, which indicate the future revenue potential the company is amassing, as well as customer interest in IonQ's technology.
The company generates income by charging clients to use its quantum technology. Customers include universities and government agencies, like the U.S. Air Force Research Lab.
But as its revenue has grown, so have the company's losses. IonQ exited Q3 with a net loss of $44.8 million, an increase from the prior year's net loss of $24 million. So, investors shouldn't expect the company to reach profitability anytime soon.
Still, it's common for tech companies to operate at a loss for years in pursuit of business growth. Also, IonQ possesses a strong balance sheet, with total assets of $565 million, with $384 million of that in cash, cash equivalents, and short-term investments. Total liabilities were $67 million.
The case for IBM
NYSE: IBM
Key Data Points
Although IBM's business is focused on cloud computing and AI solutions, it's seen as one of the leaders in the quantum computing field. That's because Big Blue has notched a number of accomplishments in quantum computing.
In 2016, IBM was the first company to make a quantum computer accessible via the cloud. Its quantum customers include Vodafone and RTX, the former Raytheon, which is working on quantum computing capabilities for the U.S. government.
Big Blue partnered with Cleveland Clinic to implement the first quantum computer dedicated to healthcare research. This partnership also incorporates IBM's main businesses of AI and cloud computing, illustrating how quantum computing is a natural fit within the company's primary offerings.
IBM doesn't break out revenue for its quantum computing business separately but, overall, is experiencing success. In Q3, it had sales of $14.8 billion, a 4.6% year-over-year increase. As a mature company, IBM's revenue growth isn't as spectacular as IonQ's, but IBM is profitable, with Q3 net income of $1.7 billion.
Moreover, IBM's financial strength allows it to offer a dividend, which is currently sporting an attractive yield of roughly 4%. The company has raised its dividend for 28 consecutive years, providing investors a dependable source of passive income.
Deciding between IBM and IonQ
Although IBM and IonQ both operate in the quantum computing field, they are very different investments. Compared to IonQ, IBM offers dependability over the long term because it is not reliant solely on quantum computing to maintain its business.
However, IonQ's quantum computing specialization enables it to focus resources on growing this business. That may not always be the case with IBM should company priorities force a shift away from quantum technology.
Another consideration is your investing approach. Income investors might opt for IBM for its reliable dividend. Growth investors with a high risk tolerance might find IonQ more to their liking because its shares hold the potential for greater upside in the long run. However, IonQ is a more speculative investment because it's a young company operating in a nascent field. But even if you're not ready to buy shares of IonQ, it's definitely worth putting on your watch list.
