IonQ (IONQ 1.98%) is one of the most popular quantum computing stocks on the market. It's a pure play and is solely committed to making its quantum technology the primary option in this industry. It's also a smaller company, with a market cap of under $20 billion.
This small size is what could deliver massive returns for IonQ stock, making it attractive to aggressive growth investors. But can IonQ turn $10,000 into $1 million? Let's find out.
Image source: Getty Images.
A 100x return is no small task
To turn $10,000 into $1 million, a 100x return is required. That's a rare feat to accomplish, but there are several companies that have accomplished this task. Should IonQ achieve this feat, it would be worth nearly $2 trillion. The list of trillion-dollar companies is fairly slim, and if IonQ joins their ranks, it will go down as one of the most successful investments in recent history.
But is that reasonable?
Currently, IonQ is participating in a race to make the first commercially viable quantum computer. The competition is stiff, and there are other pure plays competing against IonQ, along with legacy tech players, like Alphabet and Microsoft. There are several competitors in this arena, and determining who the winner will be years in advance is no easy task. So, if you're looking to gain exposure to quantum computing but don't want to deal with picking a specific winner, quantum computing ETFs are also a good option. However, an ETF limits your upside because you will own a lot of losers.
NYSE: IONQ
Key Data Points
The biggest hurdle all of these competitors are trying to clear is computing accuracy. Currently, quantum computing isn't as accurate as traditional computing methods. This limits its use cases, as users need to have assurance that what the quantum computer is telling them is correct.
IonQ is the world leader in accuracy, thanks to the computing method it selected. While most companies utilize a superconducting method, IonQ uses a trapped ion approach. This method is inherently more accurate and trades processing speed for accuracy. IonQ's competition has yet to surpass 99.9% two-qubit gate fidelity, a measure of how accurate a computer is after passing through two operations. Although there's less than a 0.01% difference between 99.9% and 99.99%, that jump is enough to be 10 times more accurate -- a massive difference.
This is a huge advantage over the competition and is IonQ's best chance of growing into the preferred quantum computing hardware supplier. However, time is ticking for IonQ.
IonQ must establish a solid foothold before the competition catches up
The expectation is that most companies involved in quantum computing will eventually reach a point where accuracy is acceptable across all computing methods. At that time, processing speed may become more of a factor, and IonQ would be at a disadvantage.
So, for IonQ to succeed, it must beat others to the punch of developing a commercially viable computing platform and achieve widespread adoption, making it harder for its initial first mover position to be disrupted. That's no easy task, but if it achieves it, can IonQ turn a $10,000 investment into $1 million?
McKinsey & Company projects that the global quantum computing market could be worth $28 billion to $72 billion. That's a wide range and shows the general uncertainty about how successful this technology will be.
A great target for IonQ to strive for is Nvidia's business model. Nvidia posts profit margins of about 50% and trades for about 50 times earnings. If IonQ captured all $72 billion of the projected market, converted 50% of those sales into profits, and traded for 50 times earnings, IonQ would have a market cap of $1.8 trillion. At IonQ's $18.2 billion market cap, this is just shy of the return required to turn $10,000 into $1 million.
However, that requires IonQ to capture all of the projection at its high end and deliver an impressive profit margin. I think the odds of that are rather slim, but that doesn't mean IonQ won't be a successful investment. If IonQ can capture a sizable chunk of the quantum computing market, it will still be a great stock pick, but it just won't make you a millionaire from a $10,000 investment.
