Nvidia (NVDA 3.29%) has seen success that few companies could dream of. It's at the center of one of the most important technological revolutions humankind has ever experienced, and it holds an impressive market share in its sector. Furthermore, Nvidia is producing margins that are unheard of for hardware companies, and any company that can replicate Nvidia's business model will likely be a successful investment.
One area where investors are looking for the next Nvidia is in quantum computing. It's a natural progression from the accelerated computing Nvidia excels at, and Nvidia isn't pursuing a quantum processing unit. So, there could be a new winner on the block for this innovative and exciting technology.
One stock investors point toward that could achieve Nvidia-like status is IonQ (IONQ +4.86%). IonQ is a pure-play quantum computing investment that is solely focused on bringing its quantum computing solution to the market. But can it replicate Nvidia's dominance?
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Nvidia is a high standard to live up to
Nvidia's competition in the accelerated computing market is fairly slim. Advanced Micro Devices is an obvious competitor, but so are companies like Broadcom that partner directly with AI hyperscalers to make custom AI chips. Still, Nvidia's graphics processing units (GPUs) are at the top of the option list when outfitting a data center with computing hardware. However, that's pretty much it for competition.
Quantum computing is vastly different. Because we're in the early stages of quantum computing development, there are countless companies competing for market share. There are other pure plays, like Rigetti Computing and D-Wave Quantum, as well as some legacy players like Alphabet and Microsoft. All of these companies are striving to reach viable quantum computing status as fast as they can, and whoever gets there first will carve out a first-mover advantage, similar to what OpenAI has done with ChatGPT in generative AI.
NASDAQ: NVDA
Key Data Points
The beginnings of IonQ and Nvidia offer a stark contrast, as Nvidia created its GPU to process gaming graphics -- a fairly uncontested field. This allowed Nvidia's first product to flop, then it iterated to make a better solution. Eventually, Nvidia's GPUs became good enough to be used for other computing tasks, like engineering simulations and cryptocurrency mining. IonQ doesn't have that luxury. Its first products need to be its best, as there is no room for error in this fierce competitive landscape.
Another facet of Nvidia's business is its dominance. One estimate points to Nvidia's share of data center GPUs hovering around 90%. That dominance level, especially when you consider that Nvidia's products have a premium over their rivals, is absolutely incredible. It will be very hard for IonQ to achieve that level of dominance, especially with the fierce competition it's facing between scrappy start-ups and legacy tech companies with nearly unlimited resources.
The reality is, IonQ will have a very difficult time duplicating Nvidia's business model. However, there is one path that could make it possible.
IonQ is pursuing a unique quantum computing technology
There isn't just one way to perform a quantum calculation. There are multiple avenues that companies can pursue in quantum technology, but not all of them will work out in the end. The most popular strategy, by far, is superconducting. This technique is used by a few pure plays and by many of the legacy tech companies. There are benefits and drawbacks of this technique, but one of the biggest hurdles superconducting is tackling is accuracy. Right now, quantum computers aren't that accurate, and superconducting methods haven't proven to be largely successful by this measure.
NYSE: IONQ
Key Data Points
IonQ uses a trapped-ion technique, which yields far superior accuracy. IonQ holds the world record for the most accurate quantum computer, and it's over 10 times as accurate as the best superconducting quantum computer. That may be an impossible challenge for its competition to overcome, which could allow it to match Nvidia's business model.
IonQ becoming the next Nvidia is far from a surefire bet. However, if IonQ can produce a superior computing system and reach an acceptable accuracy threshold, it's possible that IonQ could become the Nvidia of quantum computing. If it does, then the stock could skyrocket higher over the next decade.
