Is It Too Late to Buy IonQ Stock?

Quantum computing pioneer IonQ (IONQ 0.14%) brings advanced technology to the table, along with a very volatile stock.

Investors with an interest in quantum computing stand at a crossroads today. Is IonQ the type of long-term winner you want to buy on price dips, or will the stock fizzle out in a cloud of ionized ytterbium atoms and disappointment?

My word choices might have already tipped you off to the conclusion, but you can still read on to check out my reasoning.

Volatile stock moves

The stock’s 3-year beta value stands at 2.2 today. In other words, IonQ’s chart tends to follow the broader market’s general direction but multiplied by 2.2. If the S&P 500 market index is up by 1%, IonQ’s probably gained a bit more than 2%. The same is true for price drops, and the volatility only increases if you look at shorter or more recent time periods. Its 1-year beta is an even less stable 2.6.

Or you can look at IonQ’s price-chart squiggles to get a handle on the stock’s unstable nature. It rose 475% from the end of 2022 to September 2023, building a $4 billion market cap. Today, the stock has plunged 64% below that lofty two-year peak with a market value of $1.5 billion.

Some investors see IonQ’s twitchy chart as an opportunity to make big money. The stock should soar as the company develops and sells its revolutionary quantum computing equipment. Others see nothing but elevated risk — IonQ’s volatile stock and sky-high valuation suggest a hard crash if anything goes wrong.

Lots of potentially show-stopping risks

And a lot can go wrong for IonQ.

The company’s latest annual report has a two-page summary of potentially game-changing business risks. A deeper analysis of these risks fills the next 30 pages. Every company must provide a risk assessment, but they usually don’t take up one-quarter of the annual filing.

Here’s a brief overview of IonQ’s most challenging risk factors, according to the company’s own management:

• The development of new and more powerful quantum computing hardware may run into unexpected problems, resulting in delayed deliveries, canceled product launches, and lost contracts.
• Quantum computers may never reach their theoretically revolutionary potential to disrupt the computing market as a whole. If so, classic binary computers could continue to dominate the number-crunching world for the foreseeable future.
• IonQ could run out of cash before completing its first substantial money-maker product. This could result in costly and cumbersome fund-raising moves, such as selling stock or taking on debt, and could undermine the company’s ability to run its business and do quantum computing research in the long run.
• Again, IonQ isn’t shipping usable systems to its customers. The early designs hitting data centers so far are just demo systems — room-filling and expensive but also experimental and powerless. Here’s a direct quote from the company’s financial filings posted in February 2024: “We have not produced a scalable quantum computer and face significant barriers in our attempts to produce quantum computers. If we cannot successfully overcome those barriers, our business will be negatively impacted and could fail.”

Will the future be quantum-powered?

Quantum computers might indeed change the world someday. From cryptography to medical research, many industries could be in for a rude awakening if and when quantum systems start to crack problems no normal computer could solve. I even like IonQ’s unique focus on trapped ions, which are closer to the basic function of quantum entanglement than clumsier approaches, such as superconducting wire loops or unstable silicon crystals.

So, maybe IonQ has the right idea already, but I’m still not ready to put real money into this stock. If anything, it’s too early in IonQ’s product development history to inspire a confident investment in its stock. I’d be more interested if a larger company with much deeper pockets were to acquire IonQ and continue its research with a more generous (and stable!) budget.

Meanwhile, IonQ’s stock trades 77% below its all-time high. Please be mindful of the many risks if you’re picking up a few shares at this relative discount. There could be big gains ahead, but there are also many realistic scenarios in which IonQ’s stock goes to zero instead.

There’s a better way to add quantum computing to your stock portfolio

For now, I get all the quantum computing exposure I need from owning shares of IBM, Alphabet, and Intel. Yes, these tech titans all play in the same quantum-physics ballpark as IonQ. Again, one of these giants might end up buying IonQ and taking its research ideas further from that point. That’s the only way I’d be invested in IonQ any time soon.