IonQ inventory has surged this yr, and the corporate’s concentrate on quantum computing may make it a profitable long-term funding.
During the last two years, a lot of the dialogue surrounding synthetic intelligence (AI) has been targeted on one core kind of computing {hardware}: graphics processing models (GPUs). The parallel processing capacities of those chips make them notably effectively suited to the event and deployment of generative AI. For now, Nvidia is the most important participant within the information heart GPU house, with an estimated 88% market share.
Savvy traders perceive that GPUs are just one variable within the broader AI equation, although. One space that’s starting to draw some consideration is quantum computing, the place rising star IonQ (IONQ 0.54%) has some designs on changing into the subsequent Nvidia.
Understanding quantum computing
Conventional computer systems retailer info and information in binary bits (0s and 1s). Quantum computer systems, nonetheless, use quantum bits (qubits) as the muse for reminiscence and processing. Qubits could be take the type of completely different preparations concurrently — this dynamic is named superposition in quantum mechanics.
I do know the knowledge above sounds prefer it got here out of a science fiction novel, and also you’re in all probability questioning what it even actually means. If you concentrate on it, fashionable computer systems are just about round us always. However even with infinite info on the tip of your fingers, there are nonetheless questions that individuals and companies battle to reply with excessive accuracy.
For instance, pharmaceutical corporations continuously carry out exams in laboratories to develop groundbreaking medication. In the meantime, scientists continuously analyze patterns to attempt to predict climate forecasts or potential modifications in local weather. However on the finish of the day, each of those examples largely depend on extended trial and error.
Quantum computer systems have the potential to alter that narrative dramatically by leveraging quantum mechanics, which can’t be built-in with conventional computing programs. The first purpose of quantum computing is to unravel monumentally complicated issues that legacy programs are incapable of, and accomplish that in a matter or days and even minutes.
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How IonQ is making a splash in quantum computing
IonQ makes a speciality of a method known as “trapped ion” quantum computing. Every ion is named a pure qubit, and by trapping them, their quantum states could be manipulated extra simply. The primary advantages of this malleability function can result in diminished error charges, thereby permitting ions to take care of their quantum state for longer intervals.
In concept, this will help with processing extra refined algorithms or complicated computing at scale in a seamless trend. Throughout a latest interview on the New York Inventory Change (NYSE), IonQ CEO Peter Chapman stated that among the “main purposes” in quantum computing are chemistry and machine learning.
Researchers and software program builders can entry IonQ’s quantum computing service by cloud platforms corresponding to Azure, Google Cloud, and Amazon Internet Providers. That is an attention-grabbing enterprise mannequin as a result of, primarily, IonQ is overlaying the immense prices of capital expenditures (capex) and {hardware} wanted to construct a quantum computing platform for its clients. This course of permits corporations to entry quantum computing capabilities extra instantly, thereby serving to them scale at a sooner price.
Will IonQ turn into the subsequent Nvidia?
Whereas IonQ’s ambitions within the quantum computing world are thrilling, there are some necessary particulars that traders want to concentrate on.
First, IonQ is way from the one firm exploring quantum computing. Different gamers together with IBM, Alphabet (Google), Microsoft, and Rigetti Computing are just some corporations investing closely into quantum computing mechanics. Contemplating IonQ is just not but worthwhile, it is going to be onerous for the corporate to compete with the likes of mega cap tech within the long-run.
This results in my second level. To date in 2024, shares of IonQ have skyrocketed by over 150% — outpacing each member of the “Magnificent Seven” apart from Nvidia.
At a price-to-sales (P/S) a number of of 185, it is fairly clear that IonQ inventory is overbought and its $7 billion market cap is rooted extra within the narrative surrounding AI and quantum computing versus precise enterprise fundamentals.
In my eyes, IonQ inventory has already skilled an Nvidia-like run, and shares are due for a pullback. To me, IonQ has an extended highway forward earlier than it may be even remotely in comparison with Nvidia’s affect and standing inside the AI enviornment.
Suzanne Frey, an govt at Alphabet, is a member of The Motley Idiot’s board of administrators. Adam Spatacco has positions in Alphabet, Microsoft, and Nvidia. The Motley Idiot has positions in and recommends Alphabet, Microsoft, and Nvidia. The Motley Idiot recommends Worldwide Enterprise Machines and recommends the next choices: lengthy January 2026 $395 calls on Microsoft and brief January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure policy.
