When a stock delivers more than a fivefold gain in only 12 months, there's got to be an underlying reason. For IonQ (IONQ +3.37%), that underlying reason is a surge in investors' interest in quantum computing.
Five years ago, IonQ's market capitalization stood at nearly $1.8 billion. Today, IonQ's market cap hovers near $11.5 billion. But the advances in quantum computing going forward could be much more significant than the ones achieved so far. Where will IonQ be in five years?
NYSE: IONQ
Key Data Points
Bigger and better quantum computers
The answer to the question about IonQ's future hinges primarily on the progress the company makes on its technology roadmap. And that roadmap is ambitious.
IonQ's Forte quantum computers currently support 36 physical qubits. A qubit is the basic unit of information in quantum computing. Its Tempo system, which the company's management has stated will be released this year, will support 100 physical qubits. By 2030, IonQ believes that its technology will handle 2 million qubits.
But it's logical qubits, a collection of physical qubits encoded to protect against errors, that are critical for building functional large-scale quantum computers. IonQ expects to support 12 logical qubits in 2026. Five years from now, the company thinks that number will skyrocket to 80,000. IonQ is also banking on exponentially better quantum error correction -- a must for quantum computers to be broadly useful.
The company has two advantages that could help its make its roadmap a reality. First, IonQ's trapped-ion architecture is highly scalable. Second, its acquisition of Oxford Ionics laid the groundwork for being able to pack more qubits into standard silicon chips.
Image source: Getty Images.
A bigger and better IonQ
IonQ is already working with partners to harness the power of quantum computing in protein folding for drug discovery, large language model (LLM) fine-tuning, and other applications. Over the next few years, it hopes to use quantum computers for artificial intelligence (AI) agent assignment, battery materials discovery, training robotic AI models, and more. However, the company thinks that by 2030, its quantum computers could have a broad commercial advantage that goes beyond these applications.
BBC Research projects a $7.3 billion quantum computing market by 2030. However, global consulting firm McKinsey estimates the total addressable market for quantum computing could reach $87 billion by 2035. If these predictions are reasonable, IonQ could be on the verge of a quantum computing explosion by the end of this decade.
The company's revenue has increased by a compound annual growth rate of 175% since 2021. I don't expect IonQ's revenue growth to continue at that torrid pace even if it delivers on its roadmap. However, the company could realistically generate annual revenue of $500 million or more by 2030 if all goes well.
We can't simply multiply a standard price-to-sales ratio by IonQ's projected revenue to determine how much the quantum computing pioneer might be worth five years from now, though. Much of IonQ's valuation now is based on expectations of future growth; it will be the same story in 2030. If I had to guess, the company's market cap could be in the ballpark of $25 billion by then.
What could go wrong?
Don't bet the farm on IonQ because of this optimistic scenario. A lot could go wrong. For one thing, the company might not be able to achieve what it has laid out on its roadmap. IonQ is counting on some major breakthroughs that aren't slam dunks.
It's also important to remember that IonQ isn't the only company working furiously to develop large-scale quantum computers. Rivals such as Alphabet's (GOOG +1.10%) (GOOGL +1.31%) Google Quantum AI, IBM (IBM +3.06%), and Microsoft (MSFT +3.64%) have much deeper pockets than IonQ does.
IonQ is a speculative stock that may or may not pay off for investors. But it just might be a huge winner over the next five years and beyond.
