One of the oldest and largest pure-play quantum computing stocks is IonQ (IONQ 1.58%). The company was limping along until quantum computing stocks exploded in late 2024. Since then, the stock has been a huge winner. It's up 277.7% over the last five years:
NYSE: IONQ
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But have investors already missed the boat on this explosive growth industry? Competition in the quantum space between pure-play start-ups and established big tech companies is heating up. Is IonQ still a buy now?
How IonQ's tech excels -- and pales
The fundamental component of a quantum computer is the quantum bit, or qubit. Not all qubits are created equal.
IonQ's qubits are made using the "trapped-ion" method, which isolates a quantum particle by trapping it inside a laser beam. Qubits made from trapped-ion particles are much more stable and less error-prone than qubits created in a superconductor, but superconductor qubits can process information much faster.
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Unsurprisingly, IonQ was the first quantum computing company to report it had achieved "four nines" (that is, 99.99%) 2-qubit gate fidelity -- a measure of quantum computing accuracy. Better still, it achieved this 99.99% fidelity at higher temperatures than anybody had previously thought possible. That's important because in trapped-ion quantum computing, only 2% of the system's runtime is spent on the quantum gate pulses where the actual "computing" occurs. Meanwhile, 68% of the runtime is spent on cooling the trapped ion to prepare it for the next computation.
By showing that its system could still achieve four nines of fidelity with a higher gate temperature, IonQ indicated it might be able to trim its system runtimes significantly by spending less time on cooling. This could make its trapped-ion system much faster, perhaps eventually competing with superconductor qubit systems on speed.
The race to the top
Of course, as IonQ tries to make its highly accurate computations faster, rivals like Rigetti Computing (RGTI 4.31%) are trying to make their speedy systems more accurate. Currently, Rigetti only boasts 99.6% fidelity in its 36-qubit system. That may sound close to 99.99%, but in the world of quantum computing, every 0.01% matters. However, Rigetti has achieved gate speeds of 50 to 70 nanoseconds, which the company claims is 1,000 times faster than trapped-ion systems can manage.
If this all sounds like a bit of an arms race, that's because it is. The company that can achieve the best combination of accuracy and speed while scaling up its system to include the most qubits is likeliest to come out on top. Of course, other factors like cost, efficiency, and just plain old marketing prowess will matter, too, but all things being equal, the fastest and most accurate system is going to be the likeliest to succeed.
But even if IonQ eventually wins the race, its stock might still not be a buy now.
Image source: Getty Images.
Hurry up and wait
Right now, IonQ's stock is priced for perfection with a valuation of $16.5 billion. That means it's larger than Domino's Pizza, GoDaddy, Roku, or DraftKings. But all of those companies boast between $4 billion and $5.5 billion in annual revenue, compared to IonQ's tiny $79.8 million. IonQ is also sporting a $1.5 billion trailing-12-month net loss, which is more than 5 times worse than any of the other companies listed. That gives IonQ a valuation of 142 times trailing sales, versus 2.5 to 3.5 for the other four companies.
Of course, IonQ is an up-and-coming tech company in an emerging industry, so the hope for investors is that it will soon grow into its high valuation. But quantum computing isn't likely to break into the mainstream anytime soon.
Right now, IonQ is selling quantum systems with 100 qubits, but commercially viable systems will likely need 1 million qubits (or more). IonQ's management hopes to reach that threshold by 2030, but so do the engineers at Alphabet's Google and IBM. So investors who buy in now are signing up for at least four years of competition and escalating research and development (R&D) costs before the business is even commercially viable.
Image source: Getty Images.
If you can't beat 'em, buy 'em
On top of that, IonQ has an aggressive acquisition strategy. In the last week alone, it has announced its completion of quantum networking company Skyloom, and its intent to acquire quantum platform operator SkyWater and AI R&D specialist Seed Innovations. Right now, IonQ has more than $1 billion in cash on its balance sheet and just $20 million in debt, but that won't last long, meaning the company is likely to need to issue more shares, diluting the value of current shareholders' positions.
IonQ is one of the premier quantum stocks available to buy today, but with big gains already in the rearview mirror and an incredibly high valuation, investors who buy in now are taking a big risk that may not ultimately pay off.
True, the high volatility of this stock -- indeed, of this entire industry -- means that its share price will probably go up from its current level at some point. But it'll also probably drop sharply at some point. Long-term investors should wait to buy in unless they have exceptionally high tolerance for risk and volatility.
