Where Will IonQ Be in 3 Years?

What does the future hold for IonQ in the next three years? Let’s explore three different scenarios before deciding to invest in this quantum computing stock.

Quantum computing is touted as a technology that could revolutionize how we understand computers. It promises to solve complex problems that conventional computers struggle with, while also enhancing the speed of slow computing tasks. In theory, quantum computers excel at recognizing patterns in unstructured data, making them useful across various real-world applications. This innovation could potentially disrupt numerous industries, such as healthcare research, financial services, and cryptocurrencies.

However, these benefits are more of a long-term promise. Current quantum computers remain expensive and bulky, and their computational abilities are not yet impressive. Most proposed applications require hundreds, thousands, or even millions of qubits (basic units of quantum information) to outperform traditional digital systems.

While researchers have surpassed the 1,000-qubit milestone, such experimental systems are reliant on costly superconductors and grapple with significant error rates. The best commercial hardware currently available only features a few dozen qubits.

IonQ (IONQ 0.78%) has emerged as a frontrunner in quantum computing technology. The company recently made headlines by shipping its first international order and securing a $54.5 million research contract with the U.S. Air Force. However, these milestones are already in the past, leaving investors eager to know what lies ahead.

What position will IonQ hold in the quantum computing landscape three years from now? Could it be the best stock to invest in?

Why You Should Monitor IonQ

There are several reasons to take notice of IonQ. Here are a few key points for potential investors:

• The company has consistently outperformed Wall Street's earnings expectations in recent quarters. This trend of positive results has been ongoing since the spring of 2023, leading IonQ investors to anticipate strong earnings reports.
• Research and development (R&D) is crucial in the quantum computing sector, and IonQ is making significant investments in this area. In the second quarter, the R&D budget jumped 57% year-over-year, constituting 52% of total operating expenses.
• The investment in research is paying off, as IonQ achieved an impressive 99.9% accuracy in a two-qubit system, with a goal to reach 99.999% accuracy by the end of 2025. The company also aims to develop commercial-grade systems with 100 qubits or more by then.

The High Costs of Research and Development

Despite IonQ's accomplishments, there are notable challenges that make the stock less appealing right now:

• The R&D spending equates to 274% of IonQ's revenues during the same period. The company reported a net loss of $37.6 million in the second quarter against $11.4 million in revenues.
• IonQ raised $573 million through a merger with a special purpose acquisition company (SPAC) back in 2021. Three years later, it has $370 million in cash equivalents, having used up about a third of its reserves at an increasing rate. The question arises: how long until IonQ needs to consider taking on debt or conducting a major stock sale to sustain its operations?

While IonQ is a recognized player in quantum computing, it faces stiff competition from tech giants such as IBM, Alphabet, and Microsoft. Competing against these formidable players will be a significant challenge for IonQ, and there is potential for any of them to acquire IonQ should the company show considerable success.

IonQ's Potential in 2027

Looking ahead, IonQ could either emerge as a major player or struggle financially in the next three years. There’s also the possibility that it might become a smaller division of a larger corporation, potentially providing early investors with a lucrative buyout option.

Determining the likelihood of each scenario is challenging, akin to flipping a coin or rolling dice for an investment decision. And this uncertainty is why I do not own IonQ stock at this time; it resembles more of a gamble than a secure investment.

For now, I prefer to observe the quantum computing sector from a safe distance, with investments in established companies like IBM and Alphabet. These leading companies are as likely as IonQ to succeed in this emerging industry, and they already hold strong positions in other sectors. I will continue to monitor IonQ's progress, but currently, it seems too risky for my investment strategy.

IonQ, Quantum, Investment