Quantum computing is becoming one of the hottest sectors of the market, as it's starting to see some massive breakthroughs in the viability of the technology. While artificial intelligence (AI) investing reigns supreme, quantum computing looks to be the next major market trend, and it could become more relevant faster than most investors think.
One of the most popular quantum computing stocks on the market is IonQ (IONQ 6.32%), and many are calling for further upside from here. While commercially viable quantum computing is still a few years out, is buying IonQ stock today your ticket to becoming a millionaire?
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Commercially viable quantum computing is still a fair bit away
IonQ isn't a very large company, but it is still worth quite a bit despite its relatively small revenue stream. It has a market cap of around $12 billion, which is no small feat considering it only generated just over $50 million in revenue over the past 12 months.
Most of that revenue is from contracts that it has won or partnerships with other companies. While it is real revenue, it's much better to think of IonQ as a pre-revenue company, like a fledgling biotech. However, real revenue streams aren't far away, with IonQ's CEO projecting that the company will be profitable by 2030 and generate nearly $1 billion in annual revenue. Those are bold projections, but it would make the price tag on IonQ's stock worth it today if that prediction came true.
After 2030, IonQ projects massive market expansion, with an $87 billion market opportunity emerging by 2035. It's unlikely that IonQ will be able to capture all of that, but if it can establish itself as a solid option, it could carve out a lucrative opportunity for itself.
One fact that sets IonQ apart from the competition is the approach that it's taking to quantum computing. There are several quantum computing techniques, but the most popular involves cooling a particle to near absolute zero, so that it's easier to control. This is a very expensive process, and could be cost-prohibitive for achieving widespread feasibility.
IonQ uses a different approach, which involves trapping ions to perform quantum computing. This has several advantages, including high accuracy and not needing to cool the ion down to absolute zero, but it comes at the cost of processing speed. Time will tell if IonQ's approach is a winning one, but investing in IonQ now (alongside other quantum computing companies) gives you wide exposure to several types of quantum computing techniques.
If IonQ turns out to be a winner, will it be enough to make you a millionaire?
It would take a large investment in IonQ to make you a millionaire
Although IonQ is fairly small compared to other big tech companies, it's still rather large for its revenue. Should IonQ capture 10% of the market opportunity by 2035 and generate annual revenue of $8.7 billion, at a 10 times price-to-sales (P/S) ratio, that would value the company at $87 billion. That's an upside of 625%, which would make IonQ investors thrilled over the next decade if it could generate this return.
However, unless you start with a fairly hefty investment in IonQ now, it's unlikely to make you a millionaire. Furthermore, because IonQ is an inherently risky company, devoting more than 1% of your total portfolio to IonQ is a dangerous proposition. Anything more than that could severely affect long-term returns if IonQ fails to work out. However, a 1% position rising 625% will still give a huge boost to your portfolio.
Investing in IonQ at this point is about managing risk and knowing your risk tolerance. It may turn out to be a winning stock pick over the next few years, but it's impossible to know at this point.
