IonQ (IONQ +0.36%) is one of the leading pure-play quantum computing investment options. Unlike some of the big tech competitors, for IonQ, quantum computing is viewed as a do-or-die project.
This inherently leads to more risk with IonQ's stock, but the trade-off is the potential for explosive returns. Quantum computing is still working its way toward relevance, but it could reach that point within the next five years. Then, we'll know if IonQ is the real deal, but by then, the stock will have adjusted for the market opportunity.
Investors need to project where IonQ will be five years from now to determine if now is the right time to buy the stock. Otherwise, they could risk being late to a game-changing technology.
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IonQ's approach to quantum computing sets it apart
IonQ is a pure-play quantum computing investment, which means it doesn't have any ancillary segments to prop up the business. It relies on external contracts to fund the business, but IonQ's partnerships are among the most lucrative in the quantum computing realm. It has partnered with the U.S. Air Force Research Lab, a facility renowned for its groundbreaking research. It also has several industry partnerships, which could prove profitable once quantum computing has commercial capabilities.
The primary challenge with quantum computing currently is that companies are striving to demonstrate its relevance. There are several use cases for quantum computing, but one problem that stands in the way is its accuracy. Quantum computing's biggest strength (the ability to analyze problems that don't have a discrete answer) is also its biggest weakness, as errors can appear in a calculation. Clients don't want to second-guess the answer to a problem.
This is why IonQ's industry-leading 99.9% two-gate fidelity is a significant advantage. This measures the probability of the quantum computing system making an error when passing through two-qubit gates. The lower this figure, the higher the odds of the system making an error. Because IonQ has an accuracy advantage over competitors, it may be a more attractive choice to potential customers.
NYSE: IONQ
Key Data Points
Another reason why IonQ could succeed is the approach it's taking to quantum computing. It employs a trapped-ion approach, which eliminates the need for cooling the particle to near absolute zero. Cooling the particle is an incredibly expensive process, which could prevent quantum computing from being deployed in applications where it could excel.
However, IonQ's trapped-ion approach can be performed at room temperature. This could prove to be a key differentiating advantage, leading IonQ to significant market share gains. But will it be enough to transform the stock into a winner?
IonQ's CEO has bold predictions about its future finances
Earlier this year, CEO Peter Chapman projected that IonQ is slated to deliver nearly $1 billion in annual sales by 2030 and achieve profitability. That timeline is approaching quickly, but if it delivers on expectations, it could be a winning investment.
IonQ's stock currently has a market capitalization of around $11 billion. That means it trades for about 11 times hypothetical 2030 sales. There are numerous unknowns in that projection, and it could dramatically overstate the actual demand for quantum computing systems.
Furthermore, there's no guarantee that IonQ's approach will be the winning choice. While I think it has unique advantages, there could be underlying issues that other systems don't have, which could cause it to fail.
So, where will IonQ be in five years? That's an impossible guess. I could see it trading for $100 or $0. It may even fall from today's price, but still be worth something. IonQ's price in five years will depend on its success in the quantum computing arms race. If it proves its technology is industry-leading and can find a significant use case for it in industry, then IonQ's stock is worth buying now. But if it fails, then it's not worth your time.
It's impossible to know that now, so investors need to adjust for this huge risk by keeping position sizing small; that way, if it succeeds, it will be a strong performer in your portfolio. But if it goes to $0, it will hardly affect it.
