Quantum computing investing took off toward the end of 2024 with some major breakthrough announcements. This caused many stocks to double or triple in price nearly overnight, but that investing trend has fizzled out lately alongside the marketwide sell-off.
Some of the biggest names in quantum computing, like IonQ (IONQ 3.47%), are down over 60% from their all-time highs, which may lead investors to wonder if right now is a prime opportunity to scoop these industry leaders up for cheap.
Quantum computing has some problems that companies like IonQ are trying to solve
Quantum computing has the potential to drastically change how powerful computers are. While traditional computing has given us incredible results, like generative AI models, quantum computing can do much more with a single chip compared to millions of traditional computing chips.
The power gained from quantum computing comes from how it processes information. Traditional computing stores information in bits, which have a value of either a 0 or a 1. However, quantum computing stores information in qubits, which can better be described as the odds of information being either a 0 or 1. Because there are infinite numbers between 0 and 1 (think decimal places), the amount of information that a qubit can store is dramatically higher. However, this introduces a new problem that isn't present in traditional computing: Errors.
Because information isn't stored as a 0 or a 1, there are inherent errors in a quantum commuting solution. The biggest part of the quantum computing arms race is figuring out how to reduce these errors to produce an accurate and useful solution. While many companies have advanced breakthroughs on this topic, nobody has completely solved the issue. If a competitor in the race can solve this problem, it will easily become the top quantum computing stock to own in the space.
NYSE: IONQ
Key Data Points
While IonQ is tackling this problem, it also has a solution for getting useful information from its systems in the near term. It uses a process called partial error correction, which doesn't yield a perfect result but one that's close enough to be practically useful as clients work toward implementing quantum computers. This is a key point in the IonQ investment thesis, as it's working on making its products relevant now instead of years down the road.
This is why IonQ has received some of the largest quantum computing contracts to date from places like the U.S. Air Force Research Lab, which recently expanded its deal by $21 million. This strength is spilling over to IonQ's growth rates, as it's expected to deliver between $75 million and $95 million in revenue during 2025, around double the $43.1 million produced in 2024.
IonQ is a leader in this space, but is this latest dip a buying opportunity for the stock? Or is it just an example of a high-risk stock cooling down from the latest hype cycle?
IonQ is a very risky stock pick
Nobody knows when quantum computers will become mainstream, although IonQ's CEO is optimistic about the future. CEO Peter Chapman stated that IonQ will be profitable, with sales approaching $1 billion by 2030, which isn't that far away. That would also project IonQ's sales increasing by 10-fold over the next few years, which would be incredible growth.
However, none of that is certain, and if another quantum computing competitor beats IonQ to the punch in a major breakthrough, its stock could fall apart.
As a result, I think investors are fine purchasing IonQ shares if they are aware of its associated risks. There is no fallback business for IonQ; it's quantum computing or bust. This single issue makes IonQ stock far riskier than many other stocks, so investors should be aware that IonQ's stock could go to zero. As a result, investors need to keep their position sizing fairly low. Otherwise, it could have a huge effect on your portfolio. But, if it becomes a massive winner, it will still boost your returns over the long term.
