What’s Behind The 500% Rise In IONQ Stock?

The stock price of IonQ Inc. (NYSE: IONQ), a quantum computing company, is up a whopping 500% in the last six months. IonQ  offers access to a range of quantum computers with varying qubit counts. Unlike conventional computers that operate using binary bits that can only be either one or zero at any given moment, quantum computers employ qubits that can simultaneously exist in multiple states. This enables quantum computers to perform complex calculations with fundamentally different computational capabilities. This allows quantum computers to process sizable amounts of data and explore countless potential outcomes at once.

The application of quantum computing could range from financial modeling and drug discovery to materials science, among others. However, there is a fundamental challenge in quantum computing space, as an increasing number of errors arise as the system grows in complexity with a higher number of qubits. As with any new futuristic technology, things may be volatile at times. That said, if you want upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

Notably, there have been some advancements lately with Google’s Willow chip and Amazon’s Quantum Embark in the quantum space. This has fueled the rally in the quantum stocks at large, including IONQ stock. Furthermore, a $2.7 billion government funding for quantum computing has boded well for these stocks.

IonQ generates revenue primarily through its Quantum Computing as a Service (QCaaS) offerings. IonQ offers quantum computing access via cloud services, utilizing their distinctive approach that employs trapped ions as quantum bits. For perspective, IonQ’s qubits are ionized ytterbium atoms, which are ionized by removing an electron using lasers, also referred to as a trapping process. IonQ uses a specialized chip to hold these ions. The company’s latest offering – IonQ Forte – is a 36-qubit quantum computer designed for commercial and research applications. IonQ’s other offerings include Aria – a 25-qubit quantum cloud accessible computer, an enterprise version of Forte, and a soon-to-be launched product – Tempo – with 99.9% fidelity targeting large businesses and governments.

While quantum computing shows significant promise, it remains in a developmental stage and is not yet ready for widespread practical implementation across industries. IonQ’s revenue base of $37 million in the last twelve months is small. Like most of the other quantum computing stocks, IONQ is a high-risk high-growth potential story, with various factors at play, including technological improvements and costs. The company could potentially sell several quantum computers in the coming years, which may continue to drive its stock higher. Although the losses remain a key factor.

The company reported an operating loss of $209 million in the last twelve months. As an investor, the bet will be on the future potential of quantum computing and IonQ’s place in it. Now, IonQ is one of the handful of companies that offers high-fidelity rate and is accessible through Amazon Braket. It also has some large customers, including Hyundai, Airbus, and Dow. As the technology keeps improving, we will see better accuracy from more companies. For now, Rigetti’s Ankaa-3 has the highest fidelity rate of 99.5%. Also, look at What’s Behind The 500% Rise In RGTI Stock?

Looking at its past performance, IONQ stock has been quite volatile when compared to the broader markets. Returns for the stock were 55% in 2021, -79% in 2022, and 259% in 2023. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile, and it has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

[1] Returns as of 12/24/2024
[2] Cumulative total returns since the end of 2016

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