Nvidia (NVDA 1.37%) has been one of the premier stocks to own over the past few years. Its graphics processing units (GPUs) have become the core computing hardware used to handle artificial intelligence (AI) workloads, and there is still a ton of computing capacity that needs to be built out to meet the expected demand. As such, the company is widely expected to produce phenomenal results for the rest of the decade.
But what about in the 2030s? By then, quantum computing is expected to be commercially viable, and that new technology could prove incredibly useful. Nvidia's chips won't be going away, but that anticipated technological transition could open the door for new companies to come in and establish themselves in the high-powered computing world.
One of my top picks in the quantum computing space is IonQ (IONQ +0.61%). I think it has the potential to become the Nvidia of the 2030s if its approach to the technology proves to be a winner. Over the past 10 years, Nvidia has transformed every $10,000 invested in its stock into a jaw-dropping $3.17 million. Could IonQ have that kind of upside?
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IonQ business approach mirrors Nvidia's in many ways
The quantum computing world is filled with strong competition. There are pure plays (like IonQ) that have no backup businesses and are laser-focused on bringing quantum computing into the mainstream. Established big tech companies like Alphabet, Microsoft, and IBM are also vying for quantum computing supremacy. These titans have massive cash flows from their operations to throw at developing this new technology, so it would appear that IonQ is starting from a significant disadvantage. However, it does have a few things going for it.
Similar to how Nvidia has stayed neutral in the AI arms race, IonQ can also stay neutral because it isn't pushing clients to use its product in a particular way. Microsoft and Alphabet will likely only make their quantum computing capabilities available through their cloud computing offerings. That limits access, which could impede the spread of their quantum computing services. IonQ already makes its quantum computing capabilities available through both of these cloud services, as well as Amazon Web Services (AWS). If a client prefers not to go through a cloud provider and keep its quantum computer on-premises, IonQ has a full-stack solution that can provide them with the quantum computing hardware, ancillary products, and software necessary to run its devices. This agnostic approach mirrors Nvidia's, and it's a wise path to go down.
NYSE: IONQ
Key Data Points
Another way IonQ sets itself apart from the competition is the approach that it's taking.
Qubits are quantum computing's fundamental units, and most of the giant tech players in the space are taking the same approach to creating them: superconducting. While this approach yields a fast computer, the resulting hardware is expensive because the qubits need to be kept at a temperature close to absolute zero. That's a technically complex and energy-hungry requirement.
IonQ, by contrast, uses a trapped ion qubit approach, which is not quite as popular. While this approach doesn't yield as fast processing gate speeds, it has superior accuracy. And IonQ has made impressive progress so far on making that model scalable.
IonQ holds world records in 1-qubit and 2-qubit gate fidelity, demonstrating the accuracy of its product. Ensuring the accuracy of these systems is the key hurdle in the quantum computing world right now, so the fact that IonQ's system holds fidelity records is a big deal.
Additionally, IonQ's ability to scale its quantum computers' power rapidly by connecting multiple units echoes how Nvidia's graphics processing units (GPUs) can be connected in clusters to amplify their computing power.
IonQ has taken several pages out of Nvidia's playbook in terms of how it's developing its quantum computing products. But could its stock replicate Nvidia's stock performance?
Early-stage technologies are a gamble
It's impossible to know what IonQ's future will be. A decade ago, nobody would have predicted that AI would take off and that Nvidia GPUs would be the primary computing muscle supporting the technology. By 2035, IonQ forecasts there will be an $87 billion quantum computing market, but that's just one projection. The reality is that the market could be much smaller or larger than that. And there could be numerous big winners claiming slices of that pie, or a few, or just one.
IonQ could be a winner in quantum computing just as easily as it could be a loser. Given the degree of risk involved in the stock, investors should manage their position sizing. By not investing more than 1% of your portfolio in a company like IonQ, you can guarantee that even a complete loss won't affect your overall returns too much. But if IonQ can deliver returns like Nvidia has over the past decade, a 1% initial position could grow to become a far larger part of your portfolio.
