Could Investing $10,000 in IonQ Make You a Millionaire?

Turning $10,000 into $1 million is no easy feat. It requires a relatively small company that's offering a solution for a wide-ranging problem to capture nearly all of the market share. One of the best recent examples is Nvidia (NASDAQ: NVDA), which turned a $10,000 investment a decade ago into more than $3 million.

Unfortunately, investors don't have a time machine to go back and buy shares of this massive winner before the jump. Still, we can examine what made Nvidia a winning stock pick and apply those observations to another stock. One area that has similar potential to Nvidia is quantum computing. There is obvious overlap here, as Nvidia's graphics processing units (GPUs) are the most powerful classical computing units available. With the massive demand for AI computing power, Nvidia experienced monstrous growth.

However, if a viable quantum computing technology is developed, these GPUs could be replaced by quantum computing units, causing a quantum computing pureplay like IonQ (NYSE: IONQ) to exhibit a similar rise over the next decade.

So, can IonQ turn a $10,000 investment into $1 million? Let's take a look.

Image source: Getty Images.

IonQ's computing accuracy is far better than its peers

IonQ's approach to quantum computing is different than its peers. Instead of the typical superconducting approach, which requires cooling the particle down to near absolute zero, IonQ uses trapped ion technology. The trapped ion approach allows for quantum computing calculations to be done at room temperature, reducing input costs. Additionally, trapped ion computing is inherently more accurate than superconducting quantum computing, and this is apparent in IonQ's world records.

IonQ holds world records in quantum computing accuracy in both one-qubit and two-qubit gate fidelity tests, a measure of how accurate a quantum computer is after a computing process occurs. IonQ's two-qubit gate fidelity is 99.97%, which is significantly higher than other quantum computing companies like Rigetti Computing, which has a 99.5% fidelity in two-qubit gates.

This advantage isn't without its drawbacks. The trapped ion approach has slower processing speeds than superconducting quantum computers, which makes the technology less desirable if the two technologies can achieve similar accuracy levels.

However, if IonQ can develop a commercially viable computer and establish a foothold in the industry faster than its competitors, it will be a significant achievement. Then it may have just enough of a first-mover advantage to win the quantum computing race. There's no guarantee of this, which makes IonQ a risky stock pick.

But if it does, is there enough of a market to provide 100x returns?

IonQ has the potential for massive returns

Right now, IonQ has a market cap of around $20 billion. That means IonQ would be a $2 trillion company if it delivered 100x returns. That would be an incredible rise and would rank IonQ among the largest big tech companies, but is that realistic?

IonQ believes the total addressable market for quantum computing will be around $87 billion by 2035. For reference, Broadcom (NASDAQ: AVGO), which is worth $1.6 trillion, projects to generate around $63.3 billion in sales this fiscal year.

However, IonQ's projection isn't an annual value, so investors need to decrease their expectations. Rigetti Computing offers another market projection, where it believes the annual value for quantum computing providers will be around $15 billion to $30 billion between 2030 and 2040.

If IonQ could capture 100% of the market share ($30 billion in annual revenue), achieve 50% profit margins (similar to Nvidia's), and attain a 50 times earnings multiple (similar to Nvidia's), that would value the stock at $750 billion, well short of the $2 trillion needed to make the stock a 100-bagger. So, if we draw up the best-case scenario for IonQ, it likely won't be enough to achieve the 100x returns we're looking for.

However, this doesn't mean IonQ is a bad investment. Investors just need to adjust their expectations for this quantum computing stock. Furthermore, there are no guarantees that IonQ will have a winning quantum computing approach, and the stock could go to zero if a different company wins the quantum computing arms race. This makes IonQ a high-risk, high-reward stock.

As a result, investors should keep their position sizes relatively small; that way, if it flops, it won't be a big hit to their portfolio. But, if it hits it big and captures a large part of the market, it can still provide impressive returns; just don't expect it to make you a millionaire.

Keithen Drury has positions in Broadcom and Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.