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Any investor who has purchased $1,000 in NVIDIA (NASDAQ: NVDA) in 2010 and preserved for the trip would now be almost $400,000.
But from the current starting point, Nvidia is unlikely to make ordinary investors rich. That's because while its next-generation chips are necessary to train and run artificial intelligence (ai) systems, Nvidia now has a mind-boggling $3.6 trillion market capitalization.
This makes it the largest company in the world.
Additionally, the company faces increasing competition from its own cloud platform customers, which are developing ai chips in-house.
Therefore, investors looking for the potential “next big thing” could consider quantum computing.
A new way of computing
If quantum computing sounds difficult to understand, that's because it is (or at least it is for me).
However, the way I see it, it's like regular computing on steroids. Instead of using the boring old 1 and 0 (bits), these computers use qubits that can be 1, 0, or both at the same time.
Confused? Yes, me too, a little (no pun intended).
However, most tech giants are pouring money into this area, including AlphabetIt's Google and Nvidia. And it's easy to see why, given some of the possible use cases for this disruptive technology:
- In drug discovery, rapid advances could occur in diseases such as cancer or Alzheimer's.
- Design of new materials with superior properties (i.e. stronger or lighter).
- Quantum computers could crack traditional encryption methods in seconds, making current cybersecurity obsolete.
The action in question
Unfortunately, most startups in this emerging industry have not yet gone public. But one fascinating exception is IonQ (NYSE: IONQ), which currently has a market cap of $7 billion (the same as Nvidia had at the end of 2010).
The stock has soared 850% since the beginning of 2023.
Good commercial progress
Quantum computers are going to have their ChatGPT moment.
Peter Chapman, CEO of IonQ
The company offers cloud-based access to its quantum computers through platforms such as amazon brake and microsoft Quantum Azure Customers can pay for access to these resources to run their own algorithms and experiments.
IonQ also signs research partnerships. In the third trimester, it was associated with AstraZeneca to accelerate drug discovery and development, as well as software enterprise ansys. He is also working with hyundai in autonomous vehicles.
Quarterly revenue increased 102% year over year to $12.4 million, prompting management to raise full-year guidance to between $38.5 million and $42.5 million. And it expects full-year bookings of between $75 million and $95 million.
As expected, IonQ continues to generate losses, which adds risk here. It expects an EBITDA loss of around $110 million in 2024.
However, it had $383 million in cash at the end of September. This is about a three-year cash drain at the current rate, suggesting it is well funded.
very speculative
Quantum computers are not yet widely used because they are difficult to scale and prone to errors. But they are expected to generate up to $850 billion in economic value by 2040.
IonQ's quantum computers use trapped ions as qubits, but opposite approaches exist. My concern is that a rival technological advance could render the company's method obsolete.
Basically, I can't judge whether IonQ has a lasting competitive advantage. And this makes it very difficult to assess whether it has similar potential to Nvidia.
With the stock trading at 177 times this year's expected sales, I put it in the too tough category for now. I'm not going to buy.
