Could IonQ be the next Nvidia?

IonQ stock has risen sharply this year, and the company’s focus on quantum computing could make it a lucrative long-term investment.

Over the past two years, much of the conversation about artificial intelligence (AI) has focused on a core type of computer hardware: graphics processing units (GPUs). Due to their parallel processing capacity, these chips are particularly well suited for the development and deployment of generative AI. Currently, Nvidia is the largest player in the data center GPU space with an estimated market share of 88%.

However, experienced investors understand that GPUs are just one variable in the larger AI equation. One area that is attracting increasing attention is quantum computing, a rising star IonQ (IONQ 12.80%) has some plans to become the next Nvidia.

Understanding quantum computing

Traditional computers store information and data in binary bits (0 and 1). However, quantum computers use quantum bits (qubits) as the basis for memory and processing. Qubits can adopt different arrangements at the same time – this dynamic is known as superposition in quantum mechanics.

I know the information above sounds like it comes from a science fiction novel, and you’re probably wondering what it even really means. If you think about it, modern computers are practically always around us. But even with tons of information at your fingertips, there are still questions that people and businesses struggle to answer with high levels of accuracy.

For example, pharmaceutical companies are constantly conducting tests in laboratories to develop breakthrough drugs. Meanwhile, scientists are constantly analyzing patterns to predict weather forecasts or possible climate changes. Ultimately, however, both examples rely largely on lengthy trial and error.

Quantum computers have the potential to dramatically change this narrative by leveraging quantum mechanics that cannot be integrated into traditional computing systems. The main goal of quantum computing is to solve enormously complex problems that traditional systems are unable to do, within days or even minutes.

Image source: Getty Images

How IonQ is making a splash in quantum computing

IonQ specializes in a technique called “trapped ion” quantum computing. Each ion is called a natural qubit, and capturing these ions makes their quantum states easier to manipulate. The main advantages of this malleability property can result in lower error rates, allowing ions to maintain their quantum state for longer periods of time.

In theory, this can help seamlessly process more sophisticated algorithms or complex large-scale calculations. During a recent interview at the New York Stock Exchange (NYSE), IonQ CEO Peter Chapman said that some of the “leading applications” in quantum computing are chemistry and machine learning.

Researchers and software developers can access IonQ’s quantum computing service through cloud platforms such as Azure, Google Cloud and Amazon Web Services. This is an interesting business model becauseEssentially, IonQ assumes the immense capital expenditure (capex) and hardware required to build a quantum computing platform for its customers. This process allows companies to access quantum computing capabilities more directlywhich helps them scale faster.

Will IonQ be the next Nvidia?

While IonQ’s ambitions in the quantum computing world are exciting, there are some important details that investors need to be aware of.

First, IonQ is far from the only company working on quantum computing. Other players included IBM, alphabet (Google), MicrosoftAnd Rigetti Computing are just a few companies investing heavily in quantum computing mechanics. Considering that IonQ is not yet profitable, it will be difficult for the company to compete with the likes of Mega Cap Tech in the long run.

This leads to my second point. So far in 2024, IonQ shares have risen over 150%, outperforming all members of the Magnificent Seven except Nvidia.

At a price-to-sales (P/E) ratio of 185, it’s pretty clear that IonQ stock is overbought and its $7 billion market cap is based more on the narrative around AI and quantum computing than on actual business fundamentals.

In my opinion, IonQ stock has already seen an Nvidia-like rise, and shares are poised for a decline. In my opinion, IonQ still has a long way to go before it can even begin to compare to Nvidia’s influence and status in the AI space.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Adam Spatacco has held positions at Alphabet, Microsoft and Nvidia. The Motley Fool has positions in and recommends Alphabet, Microsoft and Nvidia. The Motley Fool recommends International Business Machines and recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has a disclosure policy.

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Understanding quantum computing

How IonQ is making a splash in quantum computing

Will IonQ be the next Nvidia?

By Amelia Journalton

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