Quantum computing is a hot topic right now. Three of the four highest-performing stocks in the last six months are pure play investments in this technology. Investors expect big things from a new class of computers, with the promise of solving incredibly complex problems in the blink of an eye.
Leading quantum computer builder IonQ (IONQ 6.31%) gained 484% in six months as of Dec. 26. Believe it or not, but that jump doesn't qualify IonQ for a top-four finish. No, IonQ lands in the 16th place on this list, far behind the 2,735% gain posted by smaller rival Quantum Computing, Inc. (QUBT 8.19%).
Can Quantum Computing build on its recent success? Will IonQ turn the tables and outperform the smaller company in 2025? What else do you need to know before investing in the explosive quantum computing market?
|
Metric |
Quantum Computing |
IonQ |
|---|---|---|
|
Market Cap |
$2.4 billion |
$10.2 billion |
|
Revenue (TTM) |
$390,000 |
$37.5 million |
|
Net Profit Margin (TTM) |
(6,159%) |
(457.9%) |
|
Free Cash Flow (TTM) |
($20.5 million) |
($120.4 million) |
|
Cash and Short-Term Investments |
$3.06 million |
$301.8 million |
Data collected from Finviz and YCharts on Dec. 26, 2024. TTM = trailing twelve months.
Compare and contrast the financial results
These financial statements have a lot in common. IonQ and Quantum Computing's stocks are worth billions of dollars despite minimal revenues and deeply negative bottom-line profits.
Neither company is attempting to make a profit at this point. They are development-stage businesses set up to deliver new and improved technologies that might support a profitable business someday.
I'm not speculating here. Here's what IonQ said about its business prospects in regulatory filings before entering the public stock market in 2021:
We believe that we will continue to incur operating and net losses each quarter until at least the time we begin significant production of our quantum computers, which is not expected to occur until 2025, at the earliest, and may occur later, or never. [...] Our business model is unproven and may never allow us to cover our costs.
Quantum Computing offered another sobering self-analysis in 2020: "We incurred negative cash flows from operating activities and recurring net losses in fiscal years 2019 and 2018. [...] These factors, among others, raise substantial doubt about our ability to continue as a going concern."
Wall Street's ditches are littered with the remains of development-stage businesses that never lived up to their early expectations. IonQ and Quantum Computing are the first to admit that they might be next in line for financial disaster, bankruptcy, and crumbling investor value.
I'm not saying that the two companies are doomed to fail, but you should be aware of the substantial risks involved in owning these stocks. Even if you don't mind risky investments, it's best to make smallish bets on any stock in this volatile industry. Some of the most promising research projects may never result in commercial-grade computing systems, after all.
NYSE: IONQ
Key Data Points
What makes these quantum computing specialists unique
IonQ is a leading manufacturer of quantum computing systems. So far, its customer list includes several branches of the U.S. military, South Korean vehicle maker Hyundai, and industrial machinery giant Caterpillar. Anyone can access IonQ hardware through popular cloud-computing platforms from Amazon, Microsoft, and Alphabet.
The IonQ Forte system hit the market a year ago. Its trapped ion architecture provides 32 qubits of quantum computing power. That's enough to perform some simple calculations, though the error rate is still high. Estimated to cost about $13 million, the Forte system is still not useful for any real-world business task.
Quantum Computing (the company, not the technology itself) started out with a tight focus on providing software and algorithms to run on quantum computing hardware from other companies. Since then, the company has merged with a quantum hardware researcher and is now looking for opportunities to sell computing systems, too.
This company is not shipping any hardware yet, though. The third-quarter report in November highlighted several partnerships and research programs, looking forward to potential system sales in 2025.
NASDAQ: QUBT
Key Data Points
How to invest in quantum computing stocks today
All things considered, I think it's too early to pick long-term winners in the promising but risky field of quantum computing. I would approach this game-changing technology from a safer angle. Some of the largest tech giants are also developing quantum computing systems these days, including some of the IonQ partners mentioned earlier. These deep-pocketed businesses are better equipped to manage the unpredictable nature of risky research projects.
But I promised to pick a winner in this specific duel, and the choice is very clear. IonQ has already proven its ability to win long-term development contracts and actually deliver a few systems to real-world customers. Moreover, this company has enough cash reserves to make it a couple of years without being forced to raise extra cash in uncomfortable ways. The Quantum Computing company doesn't have that luxury.
So I would much rather own IonQ stock than Quantum Computing shares. Your mileage may vary, but the smaller company is too risky for my blood.
