Any investor would love to get in on the next Nvidia (NASDAQ: NVDA). This tech giant has led the artificial intelligence (AI) race, developing a dominant and likely lasting position in the AI chip market, and that's translated into spectacular earnings and stock price performance. Today's biggest movers and shakers in the development of AI platforms -- from Alphabet to Microsoft -- are among Nvidia's major customers. And when Nvidia announces a new chip, these giants and many others rush to be the first to buy it.
So, it's fair to say Nvidia has played and will continue to play a key role in this billion-dollar -- and soon to be, if analysts' predictions are right, trillion-dollar -- AI boom.
There's still plenty of room to get in on the Nvidia growth story, but investors also are looking to another innovative market that could result in a similar boom, and that's quantum computing. In fact, quantum company IonQ (IONQ -7.78%), which has seen its stock price soar more than 400% over the past year, recently suggested it could become the Nvidia of quantum computing. Can this quantum player potentially follow in AI superstar Nvidia's footsteps?
Image source: Getty Images.
AI and quantum computing technologies
AI involves the training of large language models to solve complex problems. Eventually, software with greater and greater capabilities in these areas can be set to work in the form of AI agents that will make companies more efficient and help them save money. And AI can be applied in many ways to specifically advance certain industries -- for example, in healthcare, it can find better drug candidate more quickly. This AI revolution is happening now, with technology that supports those goals.
Quantum computing is a complementary but different technology. It uses quantum mechanics to solve problems that today's computers are unable to handle. Companies in the industry have various ways of advancing the technology, but they each involve using qubits to store and process data. Qubits -- as opposed to the bits used in traditional computing -- can represent more than one state: a 0, 1, or any combination of the two. This supercharges the computing process, resulting in speed and extraordinary capabilities.
In the case of IonQ, the company captures ions to use as qubits, cools them, then with lasers guides the calculation process. Quantum computing still is in the early stages of development, and IonQ even said in its 2023 annual report that its ability to grow revenue and reach profitability "will depend heavily on the successful development and further commercialization of our quantum computing systems."
How IonQ generates revenue
Still, IonQ has made significant progress over the years and currently generates revenue through the sales of hardware and related services, and the company also makes its quantum systems available to customers through Amazon's Amazon Web Services (AWS), Microsoft Azure, and Alphabet's Google Cloud. Finally, IonQ sells quantum computing consulting services, helping businesses apply the technology to their needs.
All this has helped IonQ's revenue to soar over time, but it's gotten further and further away from profitability as it invests in this potentially game-changing technology. This isn't a surprising pattern, though, for a company involved in a technology at this stage of its development story.
IONQ Revenue (Annual) data by YCharts
Now, let's consider the Nvidia comparison. IonQ's chief executive officer, Niccolo de Masi, in a recent Barron's interview, suggested the company will be the Nvidia of the quantum computing market, the leader that others will follow. "I believe IonQ will be the Nvidia player. There will be other people that copy us and follow us; they have always copied and followed us," de Masi said.
Similarities and differences of IonQ and Nvidia
We can draw two key parallels. It's true that, like Nvidia, IonQ is focused on the full stack of software, offering customers everything they may need along their path in this technology. So IonQ is setting itself up for a dominant position in the market. IonQ also is the biggest pure-play quantum company by market value, now at more than $11 billion. Investors have piled into IonQ on optimism about its technology and growth. Similarly, Nvidia's $3.3 trillion market cap sets it well ahead of chip rivals such as Advanced Micro Devices and Intel.
Now let's consider differences. While IonQ might become just as successful as Nvidia down the road, it's not traveling an identical path. Nvidia launched its initial public offering in 1999 and went on to immediately report not only revenue growth but increasing profitability.
NVDA Revenue (Annual) data by YCharts
Prior to the AI boom, Nvidia served the video gaming market with its graphics processing units (GPUs), so the company had a solid main business before branching out into AI. IonQ, which launched in 2015 and went public in 2021, started out specializing in a new and complicated technology, so its route to profitability may be longer and riskier.
All of this means that, IonQ, by going all in on a given technology -- in this case quantum computing -- resembles Nvidia. And aggressive investors aiming to get in now on potential winners should consider picking up a few shares of this innovator. But, considering that quantum computing is IonQ's focus, and this technology isn't yet fully developed, it's too early to predict with 100% certainty that this quantum player will follow in Nvidia's footsteps, dominating in its market and delivering explosive growth.
