Technology investors always are on the lookout for new game-changing innovations, and in recent years, they've been betting on the area of quantum computing. The idea is to get in on companies developing such innovations in the early days and potentially win as they reach milestones and the technology reaches its full potential.
One of the stocks that's benefited from this movement is IonQ (IONQ -0.80%), a pure-play quantum company that's soared more than 500% over the past three years.
The company shares the space with others that specialize in quantum computing, as well as market giants such as Microsoft and Alphabet, which have each made progress toward goals. However, this growth story is still in the early days.
The quantum computing market, at a compound annual growth rate of more than 30%, may reach $12 billion by 2032, according to Fortune Business Insights. Considering this, is IonQ a stock to buy now?
Image source: Getty Images.
Why are investors excited about quantum computing?
Quantum computing relies on the principles of a branch of physics focused on the interaction of subatomic particles. It stores and processes data using qubits, rather than the bits used by traditional computers.
Qubits scale exponentially, allowing for computing power that's far superior. For example, a problem that might take a standard computer thousands of years to solve could be solved by a quantum computer in a matter of minutes.
While quantum computing isn't fully applicable to problems today, companies are progressing and even generating revenue from the technology. This brings me to IonQ, which uses a technology that differs from rivals. It traps ions, then cools them to use as qubits for the processing of data. IonQ's technique also involves the use of lasers to set the qubits off on the computation path.
IonQ says it believes this method will help its systems perform "longer more sophisticated calculations with fewer errors than any quantum computer yet built."
IonQ's revenue growth
Today, to generate revenue, IonQ sells computing hardware, access to the quantum computers its developed so far, and offers quantum computing consulting services. This has helped revenue to soar over the past few years.
IONQ Revenue (Annual) data by YCharts.
IonQ has made moves to expand the potential and reach of its technology, and the perfect example is its recent acquisition of Lightsynq Technologies. This company has developed a repeater, a communications networking component that boosts the range of quantum networks. In the future, such a tool would help quantum computers connect to each other across a quantum internet.
The quantum opportunity clearly is significant, and IonQ is well-positioned to win if its research and development continue to go smoothly and reach goals. In the meantime, however, it's important to remember that risks are involved -- such as potential technological setbacks -- and technology leaders, such as Nvidia's Jensen Huang, have even said it will take many years for quantum computing to be fully useful.
This means that, if you're interested in investing in a quantum company, you should have tolerance for risk and be willing to hold on to stocks for a number of years. You also should be willing to accept volatility, as these companies have been known to rise or fall suddenly, based on comments or news regarding the quantum computing landscape.
Rising R&D costs
IonQ has made the risks clear, saying its ability to reach profitability will depend on the successful development and commercialization of its systems in the years to come. The company still operates at a loss, and research and development costs have increased.
IONQ Net Income (Annual) data by YCharts.
This pattern isn't surprising, though, at this point in the quantum computing story.
So, is IonQ stock a buy now? As I suggested above, the company isn't the best bet for cautious investors. If you're not comfortable with volatility and risk, you're better off looking for other investment opportunities in the tech industry or other sectors.
However, if you don't mind those elements and are looking for a potential winner in the quantum computing market, you might consider IonQ. The company's platform is based on many years of research, it has an innovative approach, and it's making moves to expand its presence in the field. If you're an aggressive investor, consider picking up a few shares of IonQ today to take part in this exciting quantum computing growth story.
