When you're looking for stocks that could go parabolic, you usually have to look beyond the big, established names. These are often early-stage companies, but that's also where the biggest upside comes from. The risk is high, but so is the potential reward if the company succeeds.
Let's take a closer look at two stocks that could have explosive potential.
1. IonQ
Artificial intelligence (AI) may be the biggest story in tech right now, but the next leap forward could come from quantum computing. That's where IonQ (IONQ 2.25%) is trying to make its mark. The company wants to do for quantum computing what Nvidia did for AI, and it's following a similar playbook by developing both the hardware and the supporting ecosystem around it.
NYSE: IONQ
Key Data Points
IonQ's trapped-ion systems use actual atoms instead of fabricated qubits, which makes them harder and more expensive to build, but results in much more stable qubits with fewer errors. The company has also developed software to further improve performance, including its Clifford Noise Reduction technology that reduces logical error rates and helps make its systems more scalable.
Meanwhile, IonQ recently showed it can convert photons from its trapped-ion machines into telecom wavelengths, which could one day allow quantum computers to communicate over existing fiber networks and potentially serve as the foundation for a quantum internet.
In addition, IonQ is looking to establish itself as a leader throughout the entire quantum computing ecosystem, and it's not afraid to make acquisitions to gain technology and talent. It's made several recent acquisitions, including Lightsynq for high-speed networking, Capella for satellite-based distribution, and Vector Atomic for quantum sensing.
Nonetheless, the stock remains a high-risk bet. The company generated only $28.3 million in revenue in the first half of the year while burning through $89 million in cash, which shows how early it still is. Even so, its long-term potential is massive.
As AI models continue to get more complex, quantum computing may be the only practical way to handle some of those workloads. Nvidia CEO Jensen Huang recently said quantum computing is reaching an inflection point, and if that proves true, IonQ could be one of the biggest beneficiaries. This is the kind of stock that could be volatile for years, but if it succeeds, it has the potential to go parabolic.
Image source: Getty Images
2. Applied Digital
The biggest bottleneck in AI isn't a lack of high-powered chips like graphics processing units (GPUs) -- it's a lack of cheap power to run AI workloads. That's where Applied Digital (APLD +1.79%) comes in. The company provides the space and power for massive, high-performance data centers capable of handling large language model (LLM) training and inference.
The company started as a Bitcoin miner, which turned out to be a big advantage. That business taught it how to source cheap, reliable power, and today power has become one of the most valuable commodities in the AI race. More chips can be manufactured, but data centers require massive amounts of electricity, and that's the real constraint in scaling AI infrastructure right now.
Applied Digital's business has two main parts: colocation services, where it leases space and power to clients using their own equipment; and GPU cloud services, where it rents out its computing capacity. Large data center operators, such as CoreWeave, are increasingly turning to Applied Digital to house their infrastructure and provide reliable power, and last quarter, it signed an $11 billion expansion with the neocloud operator.
The bigger news, though, is that Applied Digital has secured additional funding from Macquire to continue to build out its large-scale campuses, including its new Polaris Forge 2 facility in North Dakota. The company's pipeline now includes 4 gigawatts of potential power capacity. Typically, 1 gigawatt of power translates into about $50 billion to $60 billion in data center spending, with about two-thirds of that spent on AI chips. With Nvidia estimating that AI data center market could reach $3 trillion to $4 trillion in the coming years, Applied Digital is well-positioned as one of the companies capable of delivering the physical capacity to support that growth.
Like IonQ, Applied Digital is a high-risk, high-reward story. The company carries a lot of debt and isn't yet profitable, but if it can continue to scale, it should see huge operating leverage in the coming years. Given how massive the AI data center market is becoming, its stock has the potential for a lot of upsides from here if things fall right.
