Artificial intelligence (AI) is the favored theme in investing right now, but that's not where the story on this tech sector ends. Another tech sector, quantum computing, gets less investment attention, partially because it's long been viewed as something way off in the distance. But that view is starting to shift.
Nvidia CEO Jensen Huang recently said that quantum computing is reaching an "inflection point," which is something worth paying attention to. Eventually, the two technologies are expected to merge.
One of the companies best-positioned for this is IonQ (IONQ 0.15%), which is working to make quantum computing a reality. While that isn't going to happen tomorrow, it's making strong progress. And its effects on AI could be huge.
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Why AI will need quantum computing
Quantum computing is set to be one of the next big steps in AI advancement. The biggest AI models today require a staggering amount of compute power and use massive amounts of energy. To meaningfully advance AI models, organizations currently need both more and more graphics processing units (GPUs), as well as access to electricity. At some point, that will become unsustainable, both economically and environmentally.
This is where quantum computing can help AI evolve, as it can reduce the brute force needed to improve AI models. Classical computing uses bits to manage calculations. Bits are the most basic unit of information, and can be either a 0 or a 1. Quantum computing, meanwhile, uses quantum bits, or qubits, which can be 0, 1, or both simultaneously, to manage calculations. This allows quantum computers to speed up calculations and solve complex problems exponentially faster than traditional computers. Having the two technologies converge over time is likely to benefit both sectors.
IonQ's unique approach
IonQ is not the only quantum computing company around, but it has one of the most promising technologies. Instead of trying to build artificial qubits that act like the real thing, IonQ works with trapped ions, which are just actual atoms.
High error rates are one of the most limiting factors currently with quantum computing, and trapped ions are a lot more stable and less error-prone than the man-made versions competitors are using. IonQ has also developed ways to cut down on errors even further, like its Clifford Noise Reduction technology, which reduces logical error rates.
IonQ has already built a large research and manufacturing facility to support growth and has partnerships with major cloud computing providers, which let developers start testing the technology today. That puts it a step ahead of competitors.
The company is one of the best-funded players in the space, with more than $1.6 billion in cash and no debt on its balance sheet. This gives it the flexibility to invest heavily in research, hire top talent, and make acquisitions.
NYSE: IONQ
Key Data Points
Building out an ecosystem
IonQ has said it wants to be the Nvidia of quantum computing, so it understands that hardware alone won't win the quantum computing race. Nvidia didn't come to dominate AI because it just sold GPUs. It became the leader in the space because its CUDA software program became the default programming platform in the industry and built an entire networking platform around its chips to help them act together as a single unit.
IonQ is trying to do something similar. It's creating things such as compilers, error-correction software, and networking tools that will be needed to get real-world usable results out of quantum machines.
The company has also been working to build out its networking capabilities through acquisition. Its deal for Lightsynq gave it high-speed networking capabilities, while its acquisition of Capella provided it with a satellite-based distribution network. While that may sound futuristic, if quantum computers are going to connect at scale, they're going to need a secure, advanced networking platform.
Similar to Nvidia, these are the types of moves that can lead to a large moat down the line.
Looking ahead
Quantum computing isn't going to replace classical computing anytime soon, but it no longer appears to be decades away. By the early 2030s, we could see quantum systems being used alongside AI to help solve problems in multiple areas.
IonQ doesn't need to be the only winner in quantum computing for the stock to have huge upside, but it is positioning itself as an early leader. Note, however, that the stock's price isn't going to go straight up and will likely be volatile. Many of today's market leaders have experienced periods where their stocks were more than cut in half, including Nvidia and Amazon.
AI is the present, but quantum computing could very well be the future. IonQ is aiming to connect the two, which is why it has the potential to be a huge winner down the road.
