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Some people have hailed Quantum computing as the future of computing, with the potential to develop solutions to climate change, improve drug discovery, develop new ways to generate and store energy, and so much more. One of the leading companies in this field is IonQ (NYSE: IONQ), which has made significant breakthroughs in developing quantum computing technology.

However, despite its promising technology, it is not a risk-free investment, and investors should be cautious before investing in this company. Let’s examine the pros and cons of IonQ’s quantum computing technology and why the company may be too risky for most investors.

Why you might consider investing in the company

Quantum computing is an innovative technology that utilizes principles of quantum physics to perform specific calculations significantly faster than traditional binary computers, which store information in bits represented by either a zero (off) or a one (on). In contrast, quantum computers can manipulate quantum bits (qubits), which can exist in the on and off states simultaneously. There is also a phenomenon arising from the principles of quantum mechanics that gives quantum computers tremendous parallel processing power far above anything we can do today.

At present, quantum computers are still in their early stages of development. However, as technology progresses, many experts are optimistic that quantum computers will one day be able to solve problems that traditional computers could never hope to tackle. We may eventually solve some of the most pressing issues facing our world today — from addressing climate change to achieving sustainable living on our planet to eliminating diseases — through quantum computing. This technology’s potential applications are limitless, and it is exciting to think about the possibilities ahead!

Global market research and consulting company MarketsandMarkets estimates the global quantum computing market will grow from $866 million in 2023 at a compound annual growth rate of 38.3% to $4.375 billion in 2028. Another research company, P&S Intelligence, is even more optimistic and projects the market size to reach $65 billion by 2030. The allure of IonQ for investors is its potential to capture a significant chunk of the rapidly growing quantum computing market. It has several advantages over other quantum computing companies:

Its technology is scalable, meaning that it can be easily increased in size to create more powerful computers.
It is relatively error-free, which is essential for performing accurate calculations.
It has a solid intellectual property portfolio, which protects its technology from being copied by competitors.

Several high-profile investors are backing IonQ, including Bill Gates, Michael Dell, and Marc Benioff. Their investments show high confidence in the company’s technology and its potential to succeed. As a result of these factors, many see IonQ as one of the world’s most promising quantum computing companies. If it can commercialize its technology successfully, it could become a significant player in the quantum computing market.

It would be best if you considered the risks before investing

If you are considering investing in IonQ, you should know the risks involved. One reason for caution is that IonQ is still a relatively young company. Although it has operated since 2015, it only started trading publicly and generating revenue in 2021. Additionally, the quantum computing industry is still in its infancy, and while there is potential for significant growth, the market’s ultimate size and trajectory are challenging to predict. IonQ has yet to turn a profit, as evidenced by its net loss of $43.7 million in the second quarter of 2023, and its free cash flow is currently in decline.

IONQ Net Income (Quarterly) data by YCharts.

IonQ’s stock price has a high short interest, is highly unpredictable, and can fluctuate quickly due to market sentiment or news events. For instance, IonQ’s stock plummeted by 29% from Aug. 1 to Aug. 10, 2023, for no apparent reason, the day it released its Q2 earnings report. Some speculate the cause was a short squeeze.

Additionally, it is worth noting that IonQ’s quantum computing technology is incredibly complex and challenging for the average person to understand. Furthermore, the progress and adoption of this innovative technology may face unforeseen technical or regulatory obstacles that could impede its development.

Lastly, the competition in this field is fierce, with other tech giants such as IBM (NYSE: IBM), Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), and Rigetti Computing (NASDAQ: RGTI) investing heavily in quantum computing research. It is crucial to acknowledge that these companies — often with much beefier research and development budgets — could outpace IonQ by creating a superior solution, further increasing the pressure on IonQ to maintain its competitive edge.

Should you buy it?

Investing in IonQ is a complex decision. It is a high-risk, high-reward proposition that could yield huge returns or losses depending on how the quantum computing industry evolves. Most investors would be better off avoiding the stock. Only investors comfortable with extremely high-risk ideas should consider it. But if you don’t mind the risk, IonQ’s potential upside could be huge in the long run.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Rob Starks Jr has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet. The Motley Fool recommends International Business Machines. The Motley Fool has a disclosure policy.

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