Since ChatGPT took the world by storm in the fall of 2022, artificial intelligence (AI) has increasingly crept into many aspects of society. For instance, U.S. regulations around AI rose 56% in 2023.
Now, businesses are advancing computer science to facilitate the evolution of AI. Two prominent companies in this area are quantum computing company IonQ (IONQ 0.36%) and semiconductor-giant Nvidia (NVDA +0.10%).
Each company has developed groundbreaking technologies poised to revolutionize the computing industry, which has helped propel their stocks skyward. Through Dec. 11, IonQ's share price was up around 140%, and Nvidia's had risen about 180% in 2024.
But which company provides a better long-term investment to capitalize on the secular trend of AI? I'll dig into both businesses to answer that question.
A look at IonQ's quantum tech
NYSE: IONQ
Key Data Points
IonQ is an attractive investment because quantum computing can evolve AI beyond what's possible with the most powerful supercomputers on the planet. Quantum computers use subatomic particles to perform complex calculations in seconds that can take years for a traditional computer to complete.
IonQ isn't the only company working on quantum computers, but its technology overcomes challenges faced by the industry. For example, many quantum systems require temperatures colder than outer space to keep the subatomic particles stable, but IonQ's platform can operate at room temperature.
Its tech helped it capture customers such as Oak Ridge National Laboratory, which is using IonQ's quantum computers to modernize the U.S. power grid. Its growing customer base has led to rapid revenue growth for the company.
In the third quarter, IonQ's sales rose 102% year over year to $12.4 million. The company also captured $63.5 million in new customer bookings in the quarter.
However, IonQ isn't profitable. It exited Q3 with a net loss of $52.5 million, up from $44.8 million in the prior year, as it spent $33.2 million on research and development. It's not cheap building innovative technology.
IonQ is continually strengthening its technological advantages. In November, it announced it was acquiring quantum networking company Qubitekk. Today's AI relies on the power of many computers networked together. With the Qubitekk acquisition, IonQ intends to emulate the network effect for its quantum machines.
Nvidia's strengths in AI
NASDAQ: NVDA
Key Data Points
The rise of AI supercharged Nvidia's business as companies and governments showed an insatiable appetite for its semiconductor chips. For example, some estimates suggest ChatGPT was built using 10,000 Nvidia chips.
The company's products are popular for AI because Nvidia developed specialized chips called graphics processing units (GPUs). These provide AI systems with the computer processing power to quickly and efficiently churn through mountains of data to execute tasks.
Demand remains strong for Nvidia's products. The company reached record revenue of $35.1 billion in its fiscal Q3, ended October 27. This represents a 94% rise over the previous year. Q3 net income was also up, hitting $19.3 billion, a remarkable 109% year-over-year increase.
But its latest technology could propel the company to greater heights. Its Blackwell platform was designed specifically for the advanced computing required by AI systems. Nvidia claims it pushes the boundaries of scientific computing since each of Blackwell's GPUs boasts over 200 billion transistors.
Customers are so hungry for Blackwell, Nvidia management stated "demand greatly exceeds supply." The governments of Japan and Taiwan are among the organizations building AI supercomputers using Blackwell.
With so much product demand, Nvidia expects Q4 revenue to come in around $37.5 billion. That's a double-digit increase over the previous year's $22.1 billion.
Choosing between IonQ and Nvidia
Both companies offer good reasons to invest in them, given their compelling technologies. To pick between the pair, here are other important factors to consider.
Nvidia's Blackwell platform is so powerful, it's capable of simulating the abilities of quantum computers. Blackwell can do this because today's quantum machines are limited in how long they can perform calculations before the subatomic particles break down. As a result, quantum computers can't replace classical computers, such as Blackwell, in the near term.
Over the long run, however, quantum computers are expected to achieve quantum advantage, a term meaning a time when a classical computer can no longer keep up with a quantum machine. Some estimates predict quantum advantage will arrive some time after 2030. Consequently, it could be years before IonQ's technology potentially overtakes Nvidia's, making IonQ a more speculative investment.
In addition, with shares of each company up this year, another consideration is valuation. Here's a look at their price-to-sales ratios (P/S). The metric indicates the price investors are willing to pay for each dollar of a company's sales.
Data by YCharts.
As the chart shows, IonQ's P/S multiple has surged in recent weeks and is now incredibly high, compared to Nvidia's. This suggests Nvidia shares are a better value.
The better investment choice becomes clear when you consider three things:
- IonQ's stock appears overvalued.
- Nvidia's profitability and demand for its Blackwell platform are soaring.
- IonQ's technology is still years away from widespread adoption.
Between these two cutting-edge companies, Nvidia stands out as the winning investment in the exciting field of artificial intelligence.
