Quantum computing stands to become a lucrative investment field due to its massive upside potential. Some investors are looking at this field like it's their second chance of investing in Nvidia, a stock that turned a $10,000 investment a decade ago into more than $2 million today.
One stock I've got my eye on is IonQ (IONQ +3.16%), which looks like the current leader in this industry. I'm bullish on its outlook, but I'm also cautious due to the unknown nature of this industry.
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Quantum computing is still being sorted out
There isn't a one-size-fits-all approach in the quantum computing world. There are several ways to approach the technology, and IonQ is taking a somewhat unique approach. Its trapped ion technology is different from the superconducting technology normally used in quantum computing, but it's yielding impressive results.
IonQ's accuracy score is the best in the world, and its success stems from the architecture used in the quantum computer. Clients are recognizing this success, and IonQ is generating the most revenue out of any of the quantum computing pure plays.
In the fourth quarter, IonQ's revenue rose 429% year over year to $62 million. While not all of this revenue comes from system sales, it is generating some revenue from early-stage systems being used in research. Next year, IonQ expects to realize about $235 million in revenue, up from $130 million this year. That's huge growth and shows how the industry is starting to come around to the idea of utilizing quantum computing. It also shows the technology is progressing enough to be useful in research applications -- a gateway to commercial use.
NYSE: IONQ
Key Data Points
It will take some time for the quantum computing market to develop, but by 2035, McKinsey & Company believes it will be a huge market. They estimate that the annual quantum computing market could be worth between $28 billion and $72 billion annually. That's a large market for IonQ to capture. While there may be many winners, IonQ's accurate leadership will allow it to establish a first-mover position and make it difficult to switch away from as other competitors arise.
However, there is still a lot of risk here. IonQ's approach may be working out now, but there could be a roadblock, currently unknown, that prevents it from performing as well as its peers. Furthermore, quantum computing may never progress to the point where it's commercially viable. Both of these are real risks and could prevent IonQ's stock from becoming the next great tech stock.
While I don't think either of those will happen, they are real risks that investors must account for here. As a result, I think IonQ investors should limit their position sizing to be around 1%. That way, if it works out, it will be a huge winner and provide real growth in a portfolio. If it fails, that 1% loss won't be a huge dent in total assets.
