Why IONQ Is Not a Stock to Buy (Yet)

Stocks to sell

Quantum computing is seen as the next stage of computing and IonQ (NASDAQ:IONQ) rode that wave to huge gains in 2023. But the reality of where the market is at in its life cycle is bringing shares down to earth. This will have important implications for IONQ stock moving forward.

After surging 259% last year IONQ stock is down 13% year to date and 50% below its 52-week high hit last summer. That’s undoubtedly because quantum computing hasn’t even learned to walk yet let alone get up to the running stage IonQ’s stock suggests it should be at. There are no real practical uses yet for the current phase of the technology, the hardware isn’t up to speed, and there are a lot of problems with the technology. Other than that everything is great!

The following are the primary reasons investors should take a go-slow approach before investing in IONQ stock.

Wrapping your head around the future

The promise of quantum computing is like the 4-D chess of computing. Where traditional computers break data into very two-dimensional 1s and 0s, quantum computers use quantum bits, or qubits, which put those digits into “superposition.” That means they can be a 1, a 0, or both at the same time. Or they can be an infinite number of possibilities in between. They also possess a property called “entanglement,” which is like superposition on steroids. The qubits can communicate and cooperate, expanding their possible permutations.

Quantum computers can take all that data and explore the numerous complex patterns of probability occurring to determine the probability of any particular outcome happening. It allows quantum computers to determine all potential outcomes simultaneously.

Yeah, my brain is just cramped writing that, but quantum computing has many possible real-world uses. For example, it could determine the optimal route to take for a delivery truck or design new drugs. They could also be used to hack supposedly secure encryption data. There’s a very dark side to their usage to go along with the light. The only problem is they’re not very good at what they do yet.

While IonQ and others make quantum computers, the devices can’t make the hyperscale calculations their potential says they can. A regular computer is often better at it right now. Nor are they any faster than classic computers. Quantum computers might be slower depending on the calculation.

It’s going to take a lot more development to make quantum computing a reality and that’s why IONQ stock is falling.

Does not compute

Even though there are use cases for quantum computers, they are not practical enough for businesses to adopt them yet. IonQ makes access to its quantum computers available on the cloud computing platforms of Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), and Alphabet‘s (NASDAQ:GOOG)(NASDAQ:GOOGL) Google. Year-to-date revenue, though, is less than $16 million. While that’s more than double the year-ago figure, it speaks to a very small, limited market.

There are other limiting factors for quantum computers too, including the fact they are prone to errors. Because of their sensitivity, qubits can make substantial errors due to environmental disturbances, even very small ones. It’s called decoherence and it causes the qubits to lose their quantum capabilities.

IonQ has a workaround for the problem in development. It believes error mitigation rather than error correction using trapped ions will allow it to resolve issues faster. It says error mitigation will allow it to reach #AQ 64 status, which is where regular computers can no longer fully simulate an IonQ computer.  That will make quantum computers more valuable.

When that happens IonQ says it will be a watershed for quantum computing the way ChatGPT was for artificial intelligence. CEO Peter Chapman told industry site HPC Wire, “My guess is that just like ChatGPT, the world will be like a baseball bat to their head, like, ‘Oh, my God quantum is here and why did I miss it?’”

Perhaps, but there is still a long way to go before we get there. In the meantime, IONQ stock will undoubtedly be volatile and investors should step gingerly if they’re thinking about buying in.

On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Rich Duprey has written about stocks and investing for the past 20 years. His articles have appeared on Nasdaq.com, The Motley Fool, and Yahoo! Finance, and he has been referenced by U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, USA Today, Milwaukee Journal Sentinel, Cheddar News, The Boston Globe, L’Express, and numerous other news outlets.

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