Down 45%, Should You Buy the Dip on IonQ?

IonQ (NYSE: IONQ) began trading in late 2021, but it took a few years to gain traction with investors.

However, since Wall Street's interest in quantum computing surged last year, IonQ has been a market darling. Shares peaked at $84.64 in October, putting their lifetime gain at nearly 700%. However, the stock has fallen sharply amid recent market volatility and now trades 45% off its all-time high.

It's a classic conundrum for investors: Buy the dip or not?

Share prices don't tell the whole story, though. Despite the stock's stellar returns over the past year and a half, investors may not want to rush out and buy the stock now. Here's why.

Image source: Getty Images.

IonQ stock is still wildly disconnected from its business fundamentals

When evaluating any stock, it's important to look at the hard numbers. This can serve as a quick litmus test before putting those numbers in context to better understand what you're paying for with your hard-earned capital.

For IonQ, it definitely seems like investors are mainly paying for promise rather than substance. The company still has a $17.5 billion market cap following its recent decline, yet management anticipates finishing the year with total revenue of just $106 million to $110 million.

That gives the stock a price-to-sales (P/S) ratio of approximately 160, making IonQ one of the most expensive stocks on the market right now. Does it merit such a premium? Certainly not due to its profits; the company reported a $1.3 billion net loss through the first nine months of 2025.

Even if you're 100% sold on the quantum computing opportunity and IonQ as the company that will dominate it, buying the stock at such an inflated valuation exposes you to immense risk.

The doubts surrounding IonQ

IonQ faces three central questions:

1. How big is the actual quantum computing opportunity?
2. How much of that opportunity will IonQ capture?
3. How profitable can IonQ be?

Estimates vary widely for what the actual addressable market will be. For instance, IonQ points to one study that estimates quantum computing will create $1 trillion to $2 trillion in economic value over the next decade. Then, you have a report from Grand View Research, which estimates the market will grow to just $4.2 billion by 2030.

Quantum computers are highly susceptible to their operating environment. They're currently too error-prone for meaningful real-world uses. That will change over time as the technology improves, but it's unclear when and how it will translate into real market value for the companies in this space.

IonQ currently sells access to its latest quantum computers via the cloud, partnering with cloud providers such as Amazon, Microsoft, and Alphabet. But these companies are also developing their own quantum computing technology.

If quantum computing realizes its potential, IonQ is bound to face stiff competition from these larger, more entrenched tech giants, as well as a handful of other pure-play companies. That makes it difficult to know where IonQ will ultimately rank in the industry, or what competition might mean for its growth and earnings outlook.

That's not to say that IonQ can't emerge as a quantum computing winner, but it's fair, at the very least, to point out these concerns.

It doesn't hurt to stay patient and let IonQ prove itself

All those questions bolster the argument for taking a wait-and-see approach with this stock. The higher the valuation, the higher the stock has to fall if it turns out IonQ isn't as well-positioned for quantum computing, or if the market opportunity isn't as lucrative as hoped.

The stock could also plunge further if the broad market experiences increased volatility. Few stocks trade at more than 20 to 30 times revenue, let alone IonQ's triple-digit valuation.

It may be wise to sit back and monitor IonQ from the sidelines and let it prove itself. The company has spent a lot of money on acquisitions recently, which seems to have fueled much of the impressive revenue growth reported over the past year.

Investors should look for clearer commercial momentum with organic revenue growth driven by increased demand for its quantum computers, not acquisitions. If the recent results prove sustainable, the stock's P/S ratio should fall to a more reasonable level, giving investors a better entry point.

Justin Pope has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Amazon, IonQ, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.