Is IonQ Stock a Buy?

E-commerce, cloud computing, artificial intelligence (AI). What's the next big thing? Many investors are betting that it will be quantum computing.

Sure, quantum computing stocks have sold off this year as the broader market tumbled. IonQ (NYSE: IONQ), one of the industry's leaders, is down more than 30%. However, the stock has still more than tripled over the last 12 months. Is IonQ stock a buy on the pullback?

The promise of quantum computing

A critical factor in determining whether or not to buy IonQ is appreciating the promise of quantum computing. You don't have to fully understand the technology to gain this appreciation, but a little background might help.

Quantum computing incorporates the principles of quantum physics to process information. Instead of using bits (1s and 0s) like traditional computers, quantum computers use qubits that can be a 1, a 0, or even both simultaneously (which is called superposition). As a result, a qubits can hold more information than bits.

They can also be connected in a strange way called entanglement. If you measure the state of one entangled qubit, it reveals information about the state of another qubit, no matter the distance between them. Harnessing the power of entanglement enables quantum computers to process calculations more rapidly.

Quantum computers could solve super-complicated problems that even the most powerful supercomputers today can't handle. Potential uses include breaking current encryption methods and creating new ones, developing new materials, drug discovery, financial modeling, logistics optimization, and more.

As you might imagine, the commercial potential for quantum computing is tremendous. Quantum computers and networks are projected to create up to $880 billion in economic value by 2040. The quantum computing hardware and software market could reach roughly $170 billion by the end of the next decade.

Image source: Getty Images.

IonQ's advantages

With that kind of opportunity, multiple players are scrambling for position in the quantum computing market. But several factors make IonQ stand out.

First, the company has already developed multiple quantum computing products. IonQ launched its pioneering Harmony quantum computer in 2019. It followed up with the introduction of Aria in 2021. The higher-performing Forte system became commercially available in 2023. The company now sells Forte Enterprise and plans to launch its newest quantum computer, called Tempo, this year.

IonQ's architecture is faster than its competitors' trapped-ion architectures. Its error correction process also has much lower overhead and is more scalable. The company's intellectual property is well protected, too: IonQ has been granted 176 patents and has another 341 patents pending. Its acquisitions of ID Quantique and Qubitekk will boost the total patents owned to 933.

One important thing to look at with an up-and-coming company operating in a new technology space is its partnerships. IonQ scores highly on this front. It teamed up with SK Telecom in South Korea and with Toyota Tsusho in Japan. IonQ and General Dynamics are partnering to harness quantum computing in fraud detection. The company is working with the U.S. Air Force to develop secure quantum networks. IonQ and Nvidia collaborated on developing a quantum solution for calculating the electronic structure of molecules.

To buy or not to buy?

So, is IonQ stock a good pick to buy right now? I think the answer depends on your investing style.

Risk-averse investors will probably want to look elsewhere. IonQ remains unprofitable, posting a net loss of nearly $332 million last year. It could take years for quantum computing to fulfill its potential. And there's no guarantee that IonQ will emerge as one of the success stories.

However, I think IonQ is an attractive pick for aggressive investors with a long-term perspective. Quantum computing truly could be the next big thing. IonQ is one of the early leaders in the industry. Its stock will likely continue to be highly volatile. But I wouldn't be surprised if IonQ is worth a lot more than the current market cap of around $6.8 billion by the end of this decade.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.