With artificial intelligence (AI) becoming such a big push in the business world, many companies are attempting to find ways to speed up the model creation process and make it more accurate. One way to do that is with quantum computing, and there's one pure-play investment available to capitalize on that: IonQ (IONQ 9.66%).
Quantum computing is still in its infancy, but could this be the year it takes off?
Quantum computing can supercharge AI workloads
Quantum computing is a fancy buzzword, and many people may be using it without knowing what it is and why it's better than standard computing, which uses a "bit" representing 0 or 1. This only allows for straightforward processing. Quantum computing uses "qubits," which allows for parallel processing.
Essentially, instead of a 0 or a 1, imagine a sphere with a radius of 1. The solution could be anywhere along that sphere, allowing the computer to make a nearly infinite number of outcomes for just one input.
Image source: IonQ.
Quantum computing won't replace regular computers -- it's too expensive due to the specialized equipment needed. But for arduous tasks like AI, drug discovery, or other engineering simulations, it could be a game changer. IonQ is a leader in this space and is just getting started.
In Q3, the company's revenue rose 122% to $6.1 million. But what's a bigger deal is that it reported bookings of $26.3 million, bringing its total to $58.4 million. That means demand is starting to pile up for these machines, which is crucial for IonQ to become a powerhouse in this space.
Most of this rise came from the U.S. Air Force purchasing a $25.5 million computer for its Air Force Research Lab. This will be a contract to watch, as it could lead to more business if IonQ delivers a quality product to government customers.
But the question is, can IonQ survive long enough to make it to a point where it sees its product widely deployed?
The clock to profitability is ticking
IonQ is such an early-stage company that it's far from breaking even. Unsurprisingly, its research and development costs are high and drove a massive operating loss of $42.2 million. Fortunately, the company has around $384 million in cash and short-term investments, so it should be able to survive for about two more years before needing to raise more money.
It's unlikely that IonQ would even get to that point. The company's market cap is only around $3 billion, so it's feasible that a company like Alphabet or Microsoft could come along and scoop it up if it was looking to sell. But does that mean you should buy it?
Valuing a company like IonQ is practically impossible, as it trades for over 150x sales because it's an early-stage business with a lot of future business ahead.
IONQ PS Ratio data by YCharts.
As a result, giving a buy or sell recommendation doesn't apply. It all boils down to whether or not you believe that quantum computing can make a difference.
If you do, then devoting no more than 1% of your portfolio to it is smart because if it takes off, it'll grow to become a massive part of your portfolio. But if it crashes and burns, it won't hurt your overall returns.
IonQ could make a huge difference in AI. For my money, however, I'll likely invest in some other surefire AI investments.
