The arrival of artificial intelligence (AI) has driven a massive market rally, especially in technology stocks, that has persisted for most of the past three years.
Wall Street's enthusiasm for artificial intelligence has flowed into quantum computing. The hope that quantum technology can unlock AI's full potential has sent various quantum computing stocks soaring as investors try to gauge which company could emerge as a big winner, much like Nvidia has with AI.
IonQ (IONQ +3.20%) is a leading candidate, and its CEO has gone so far as to suggest the company hopes to replicate Nvidia's AI dominance in quantum computing.
Now, armed with $3.5 billion in cash, is the company poised to deliver on its ambitions? Here is what you need to know.
Image source: Getty Images
IonQ is loaded with cash to fund its growth efforts
Quantum computers use quantum mechanics to perform complex calculations dramatically faster than today's computers. Late last year, an experimental quantum chip from Google (Alphabet) performed a test computation in under five minutes that would take a modern supercomputer longer than our universe has existed. Like, whoa.
IonQ is developing a commercial quantum computing platform to harness that mind-blowing computing power and enhance existing technologies or even create new ones. However, quantum computers are currently unreliable. Their sensitivity to their operating environment makes them highly prone to errors.
When you read about technological advancements from IonQ or other quantum computing companies, it's often about developing computers capable of processing more qubits with higher accuracy, meaning fewer errors.
To date, most quantum computing applications are for research purposes, so there is a minimal commercial opportunity for IonQ at the moment. The company is guiding for $110 million in full-2025 revenue, but its operating activities have burned over $208 million through nine months of this year.
IonQ recently sold $2 billion in new shares to the market. Adding those funds brings the company's total cash position to $3.5 billion, enough to fund its business for the near future.
But having funding doesn't guarantee IonQ's success
IonQ faces several potential hurdles in the quantum computing space.
First, it's still highly debatable how much commercial potential quantum computing has. While quantum computers have proven they can exponentially speed up computations, it's still extremely early to know how and when software developers can apply that technology to real-world use cases.
Industry experts have such wide-ranging opinions on both the size of quantum computing's addressable market and the timeline to make that potential a reality. Research from McKinsey & Company estimates that quantum computing revenue could soar from $4 billion last year to $72 billion by 2035. On the other hand, some tech CEOs are staying cautious. Google's Sundar Pichai estimated earlier this year that practical quantum computers are five to 10 years away.
There are competitive challenges, too. If quantum computing's upside proves genuine, IonQ will face immediate competition from many deep-pocketed companies that are developing quantum technology, including Alphabet, Amazon, International Business Machines (IBM), Microsoft, and Nvidia. That's before getting into other smaller start-up companies.
IonQ currently sells access to its existing quantum computer through cloud companies, but these companies could sever those ties as quantum computing matures and they develop their own offerings.
How well could IonQ build its business outside of the entrenched cloud computing ecosystems of Amazon, Microsoft, and Alphabet? Will IonQ's technology come out ahead of others? Or, if selling quantum computing to commercial clients comes down to price, can it survive a price war with trillion-dollar companies?
NYSE: IONQ
Key Data Points
The stock is flashing some warning signs
With so much uncertainty, a pure-play quantum computing stock with little revenue and steep losses, such as IonQ, becomes a precarious investment.
Yet the stock trades at an astronomical valuation.
With a market cap of just over $19 billion, IonQ is trading at roughly 172 times the high end of its updated 2025 revenue guidance. That makes it one of the most expensive stocks on the entire market, a perilous risk-reward proposition for investors, given how many things could go wrong for IonQ's business or quantum computing as a whole.
IonQ's $3.5 billion cash hoard buys it plenty of time to continue developing quantum computers and to invest in building out its business model over the coming years. But no, the cash alone doesn't make IonQ a dominant force in its field, or a viable long-term investment, to say the least.
If anything, IonQ is representative of the market's enthusiasm going too far. Investors should tread very carefully here.
