Is IONQ Stock the Next NVIDIA and Worth Buying Now?

With the arrival of artificial intelligence (AI), NVIDIA Corporation NVDA became a Wall Street darling as it witnessed huge growth after going public in 1999. Now, with quantum computing being a rising tech trend, will IonQ, Inc. IONQ mirror NVIDIA’s success in the future and is it a promising investment? Let’s find out – 

Reasons to Be Bullish on IONQ Stock

According to McKinsey, the quantum computing market is projected to reach $2 trillion by 2035. Growth in quantum computing bodes well for IonQ as its quantum computing system helps Magnificent 7 stocks, such as Microsoft Corporation MSFT and Amazon.com, Inc. AMZN, by granting AI researchers access to quantum computing models.

IonQ stands out in quantum computing as its linear ion chains are capable of reaching over 100 qubits, resulting in fewer errors compared to other quantum computers. Such prowess helped IonQ notch revenues of $43.1 million last year, representing growth of 95% from a year ago. Revenues surpassed the upper end of the company’s earlier announced guidance range.

At NVIDIA’s latest “Quantum Day” event, CEO Jensen Huang approved that significant growth potential lies ahead for quantum computing, indicating a positive outlook for IonQ. He retracted his previous statement at the CES conference, where he said that quantum computing would take at least 15 years before it becomes practical.

In reality, IonQ recently showed that quantum computing is 12% faster than classical computing, an indication that quantum computing will be commercially viable soon. The breakthrough resulted from collaborating with Ansys, an engineering simulation company.

IonQ also has a solid cash balance, a prerequisite for quantum computing companies for continued research and development, and strategic mergers and acquisitions. IonQ raised around $360 million in net proceeds from a fruitful equity offering, increasing its pro forma cash balance to over $700 million.

Should I Invest in IONQ Stock Now? Could it Be the Next NVIDIA?

IonQ is a top choice among pure-play quantum stocks due to its stability and impressive advances in the quantum computing market, making it an attractive investment option (read more: Why Buy QBTS & IONQ Stocks After NVIDIA Quantum Day?).

Brokers also have faith in IonQ’s growth potential. They have raised IONQ’s average short-term price target by 70% to $42.17 from the previous $24.80. The highest target is set at $54, an upside of 117.7%.

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However, it’s premature to conclude that IONQ is the next NVIDIA since the latter’s solid financials, insane demand for chips and GPU dominance are expected to propel its stock price higher (read more: Which AI Stock, NVIDIA or Palantir, Has More Upside and Is a Buy?).

On the other hand, IonQ’s high price-to-sales ratio of 119.7 indicates that the stock is overvalued. The company also remains unprofitable. For 2024, IonQ posted a net loss of $331.6 million, which may impede its long-term growth.

For the time being, IonQ has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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