Can IONQ Become the NVIDIA of Quantum Computing, and Is It a Buy?

IonQ, Inc.’s IONQ shares surged 457.9% over the past year, driven by its significant advancements in quantum computing. IonQ has offered its customers quantum systems via platforms like Microsoft Corporation’s MSFT Azure, Amazon.com, Inc.’s AMZN Amazon Web Services, and Alphabet Inc.’s GOOGL Google Cloud. 

IonQ now aims to position itself as the NVIDIA Corporation NVDA of quantum computing. Will it be able to achieve this goal, and is this an opportune moment to invest in its shares? Let’s find out –  

Reasons to Be Bullish on IONQ 

IonQ has prepared the groundwork for its quantum computers to seamlessly integrate into real-world applications. IonQ is preparing compatible trapped-ion quantum computers for major cloud platforms. IonQ has already acquired several companies, including Qubitekk, ID Quantique, and Lightsynq Technologies, to enhance its presence in the quantum field and has secured contracts from the U.S. Air Force Research Lab, which is expected to drive significant growth for the company in the next two years. 

IonQ’s revenues have increased significantly since its initial public offering in 2021. Management projects revenues between $82 million and $100 million this year, significantly higher than $43.1 million in 2024.  

The company is on a positive trajectory, having reported second-quarter revenues of $20.7 million compared to $11.4 million last year, and anticipates third-quarter revenues of $25 million, nearly double the previous year’s figures. This revenue growth indicates that the company’s acquisition strategy is effective and its business model is solid.  

Can IONQ Become the NVIDIA in Quantum Computing? 

IonQ aspires to become the NVIDIA of quantum computing by relying on consistent revenue growth and successful acquisitions, with more anticipated in the future. However, despite revenue growth, IonQ hasn’t generated any profit. In the second quarter, IonQ had an operating expense of $181.3 million, which resulted in an operating loss of $160.6 million, way more than $48.9 million loss a year ago.  

The operating loss exceeded revenue growth, which can compel IonQ to face financial challenges and jeopardize its aim to become the NVIDIA of quantum computing. NVIDIA, in reality, is in a better position to compete against pure-play quantum computing stocks like IonQ. This is because NVIDIA aims to integrate its graphics processing units (GPUs) and quantum processing units (QPUs) in a hybrid quantum system to efficiently manage calculation errors. Utilizing its GPU framework serves as an effective bridge from current classical computers to quantum technology. 

Additionally, in contrast to IonQ, NVIDIA has reported an operating income of $21.6 billion in the fiscal first quarter, up 28% year over year. Its revenues also jumped 69% year over year to $44.1 billion. Being a profitable enterprise will enable NVIDIA to effectively tackle the challenges of quantum computing and expand its operations. Therefore, it is premature to determine that IonQ could become the NVIDIA of quantum computing.  

Here’s How to Trade IONQ Stock Now 

The series of acquisitions indicates that IonQ has bold plans to grow in the quantum computing industry, which is projected to reach a value of $100 billion by 2035, according to McKinsey. This should encourage stakeholders to remain invested in IonQ stock.  

However, new investors should proceed with caution. Quantum computing is still in its early stages, and IonQ is not yet profitable. Several leading CEOs have stated that the widespread use of quantum computing technology is still years away and that it remains prone to errors. Therefore, IonQ is a risky investment suitable only for high-risk-tolerance investors.  

Let’s not forget that IonQ is an overpriced stock and could see its price fall when the market corrects itself. IonQ’s forward price-to-sales (P/S) ratio stands at 126.59 compared to 4.14 for the Computer-Integrated System industry.

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For now, IonQ has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

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

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