Quantum Computing Stock Showdown: IonQ vs. Quantum Computing, Inc.

The field of Quantum Computing is generating significant buzz in the tech world. Notably, three out of the top four performing stocks over the past six months are dedicated investments in this groundbreaking technology. Investors have high expectations for this emerging class of computers, as they promise to tackle incredibly intricate problems almost instantaneously.

Leading the charge in quantum computing innovation, IonQ (IONQ -5.72%) experienced an astonishing 484% increase in stock value within just six months as of December 26. Surprisingly, this remarkable surge positions IonQ only in 16th place among its peers, overshadowed by the staggering 2,735% growth of its smaller competitor, Quantum Computing, Inc. (QUBT -4.63%).

Can Quantum Computing maintain its impressive momentum? Will IonQ manage to reverse the trend and outperform its smaller rival by 2025? What critical information should potential investors consider before diving into the explosive world of quantum computing?

Data collected from Finviz and YCharts on Dec. 26, 2024. TTM = trailing twelve months.

Thorough Comparison of Financial Results of IonQ and Quantum Computing

When analyzing the financial statements of both IonQ and Quantum Computing, it’s evident that they share several characteristics. Both companies boast stock valuations in the billions despite their relatively low revenue figures and significantly negative profit margins.

At this stage, neither company is focused on generating profits. Instead, they are in the developmental phase, aiming to create advanced technologies that could potentially lead to profitable business operations in the future.

This isn’t mere speculation; IonQ has explicitly stated its business outlook in regulatory filings prior to its public market debut in 2021:

We anticipate that we will continue to incur operational and net losses each quarter until we commence substantial production of our quantum computers, which is not expected to happen until 2025 at the earliest, and it may occur later, or not at all. […] Our business model remains unproven and may never enable us to cover our expenses.

Quantum Computing has also provided a candid self-assessment in 2020: “We reported negative cash flows from operational activities and ongoing net losses during the fiscal years 2019 and 2018. […] These circumstances, among others, cast considerable doubt on our ability to remain a viable entity.”

The annals of Wall Street are filled with the remnants of development-stage firms that failed to meet their initial promises. Both IonQ and Quantum Computing acknowledge the possibility of facing financial challenges, including bankruptcy and diminishing investor confidence.

While I’m not predicting doom for these companies, it’s crucial to recognize the significant risks associated with investing in their stocks. Even if you are comfortable with high-risk investments, it’s prudent to limit your exposure in this unpredictable industry. Many promising research initiatives may never advance to the stage of producing commercial-grade computing systems.

Unique Attributes of Leading Quantum Computing Companies

IonQ stands out as a prominent manufacturer of quantum computing systems. Its current clientele includes various branches of the U.S. military, the South Korean automotive manufacturer Hyundai, and the industrial giant Caterpillar. Customers can access IonQ’s hardware via popular cloud-computing platforms operated by Amazon, Microsoft, and Alphabet.

The IonQ Forte system was introduced to the market a year ago, featuring a trapped ion architecture that provides 32 qubits of quantum computing power. While this is sufficient for executing some basic calculations, the error rates remain high. Priced at approximately $13 million, the Forte system is not yet suitable for any practical business applications.

Initially, Quantum Computing (the company) concentrated on developing software and algorithms designed to operate on quantum computing hardware created by other firms. However, it has since merged with a quantum hardware research entity and is now exploring opportunities to market its own computing systems.

As of now, this company has not begun shipping hardware. The third-quarter report released in November highlighted various partnerships and research initiatives, with an optimistic outlook for potential system sales by 2025.

Strategies for Investing in Quantum Computing Stocks

Given the current landscape, I believe it is premature to identify long-term champions in the promising yet volatile realm of quantum computing. A more cautious approach would be to consider larger tech corporations that are also developing quantum computing systems, including those mentioned as partners of IonQ. These financially robust companies are better positioned to navigate the unpredictable challenges associated with high-risk research projects.

However, I must choose a frontrunner in this specific matchup, and the decision is straightforward. IonQ has already demonstrated its capability to secure long-term development contracts and successfully deliver a handful of systems to actual customers. Furthermore, the company maintains sufficient cash reserves to sustain operations for several years without the need to seek additional funds under unfavorable conditions. Quantum Computing lacks this financial flexibility.

Therefore, I would prefer to invest in IonQ stock rather than shares of Quantum Computing. Your investment preferences may differ, but the smaller company’s risk profile is too great for my comfort.

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