Artificial intelligence (AI) has been the hottest sector on Wall Street for more than two years. And, arguably, quantum computing is now the hottest subsector within AI. So, let's have a closer look at two quantum computing stocks to watch in 2025.
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IonQ
First up is IonQ (IONQ 6.31%). As of this writing, shares of IonQ are up more than 275% over the past 12 months.
Needless to say, this high-flying quantum computing stock isn't for everyone. Like many companies in the field, IonQ doesn't have rock-solid fundamentals, as it is still in the very early stages of its business life cycle. Right now, the company is focused on research and development (R&D), and its financial results reflect that status.
In its most recent quarter (ended Sept. 30, 2024), the company reported only $12.4 million in revenue. Bear in mind, I say 'only' because many public companies report well over $1 billion in revenue each quarter. For those companies, $12 million in revenue is like a rounding error.
At any rate, IonQ's quarterly revenue did increase by 104% year over year, so the company is growing quickly. However, potential investors shouldn't overlook how small its sales are when compared to other public companies.
NYSE: IONQ
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Turning to profitability, IonQ reported a net loss of $52.5 million; the company's quarterly losses amounted to roughly 4x its sales. As for its balance sheet, IonQ has about $365 million in cash on hand and only $18 million in debt. That's reassuring, as the company's free cash flow is negative. Over the last 12 months, it has a negative operating cash flow of about $92 million.
None of this is to say that IonQ's fundamentals are unexpected. As a cutting-edge company trying to develop a breakthrough technology, IonQ is spending heavily on research and development. Over the last 12 months, the company has poured roughly $30 million each quarter into R&D -- logically prioritizing that above all else.
However, potential investors should understand there are risks to the company's strategy -- and owning its stock. If IonQ's research pays off. and the company announces key improvements to quantum computing technology, shareholders could be handsomely rewarded. If not, there is little to prevent IonQ shares from tumbling from their current highs. In other words, IonQ stock isn't for every investor or portfolio.
Alphabet
Then there's Alphabet (GOOG +1.49%)(GOOGL +1.43%).
In some ways, the Google parent is responsible for kicking off the quantum computing rally. In early December 2024, Google announced that its Willow quantum computing chip had performed a complex computation in five minutes. The catch? It would take a present-day supercomputer 10 septillion years (yes, that is a real number) to perform the same calculation.
Obviously, this was a big deal, and hopes soared that practical quantum computing could be much closer than anyone expected. However, there are still major hurdles to overcome when it comes to quantum computing.
For one thing, quantum computers are notoriously error-prone. Because of their design, quantum bits, or qubits, are often unstable. Indeed, chips like Google's Willow must be kept extremely cold -- near absolute zero -- to function properly.
NASDAQ: GOOG
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Moreover, while Willow's problem-solving feat was impressive, some scientists believe we remain years -- if not decades away -- from practical quantum computers that can be put to use in fields like medicine or engineering.
In short, quantum computing remains an experimental field for Alphabet. However, that might present an opportunity for investors who would like to have a stake in the quantum computing revolution but also want a more robust business model.
Alphabet is a mature company, which generated about $340 billion in revenue over the last 12 months and $94 billion in net income over the same period. It has multiple revenue streams ranging from search to cloud computing to video streaming.
In other words, not all of Alphabet's egg are in the quantum computing basket. Nevertheless, if the company does make a breakthrough within the field, an entirely new revenue stream could be unleashed that would make Alphabet all the more appealing to investors. And that makes Alphabet a compelling quantum computing stock to watch in 2025 -- and beyond.
