Is This Quantum Chip Stock Set to Surge 22,660% Like Nvidia Did?

Over the past 10 years, Nvidia's (NASDAQ: NVDA) stock skyrocketed 22,660%. That massive rally was driven by its soaring sales of data center GPUs for processing complex machine learning and artificial intelligence (AI) tasks. It still has plenty of room to grow as the AI market expands, but it's already the world's most valuable company with a market cap of $4.3 trillion and probably won't replicate those millionaire-making gains over the next decade.

Therefore, investors who are searching for the next Nvidia might want to look at the nascent quantum computing market instead of the saturated AI market. Let's see if one of the early movers in that market -- IonQ (NYSE: IONQ) -- could deliver those life-changing returns.

Image source: Getty Images.

What sets IonQ apart from other quantum computing stocks?

Classical computers, including Nvidia's GPUs, store their data in binary bits of zeros and ones. Quantum computers can store those zeros and ones simultaneously in qubits, which allows them to process certain computing tasks at a much faster rate.

Quantum computers are still mainly used for niche research projects because they're bigger, pricier, more fragile, and less energy-efficient than classical computers. While they can process more data, they tend to generate a higher percentage of errors. But over the next few years, quantum computers could become smaller, more resilient, and more power-efficient as their accuracy improves.

Most quantum computing companies -- including IBM, Rigetti Computing, and D-Wave Quantum -- run electrons (subatomic particles with a negative charge) through "superconducting loops" to process data in a quantum state. These systems are relatively easy to manufacture, but they're expensive to operate because they need to be cryogenically refrigerated.

IonQ differentiates itself from those electron-driven companies by trapping ions (individually charged atoms) in electromagnetic fields and cooling them with tiny lasers to process data. Those "trapped-ion" systems can operate at room temperature, which makes them smaller and more scalable than electron-based systems. But these systems are also harder to manufacture and more fragile, and their lasers need to be constantly recalibrated.

Those issues could eventually be resolved as IonQ improves its trapped-ion technology with its newer systems. It has already launched three trapped-ion quantum systems so far: its original Aria system, its flagship Forte system, and its Forte Enterprise system for data centers. The company plans to launch its fourth system, the Tempo, in the near future. It also provides its quantum computing power as a cloud-based service.

How fast could IonQ grow over the next decade?

IonQ generates most of its revenue from government contracts. To support that core business, it recently acquired Oxford Ionics, which also develops trapped-ion systems; and Vector Atomic, which develops quantum sensing tools for national security applications. In the future, IonQ could attract more commercial customers as its technology matures, economies of scale kick in, and more software is developed for quantum computers. But for now, its systems are still mainly used for niche government research projects.

In 2024, IonQ's revenue surged 95% to $43 million. From 2024 to 2027, analysts expect that figure to increase at a CAGR of 94% to $312 million. That explosive growth could be driven by its new systems, new customers, and rapidly rising processing power, which it measures in algorithmic qubits (AQ). Both versions of its Forte system reached 36 AQ at the end of 2024, and it achieved 64 AQ this October (three months ahead of schedule) on a development version of its Tempo system.

But could IonQ replicate Nvidia's 22,600% gain?

IonQ's future looks bright, but it's expected to stay unprofitable for the foreseeable future. By comparison, Nvidia was already firmly profitable on a generally accepted accounting principles (GAAP) back in fiscal 2014 (which ended in January 2014).

Another glaring issue is IonQ's valuation. With a market cap of $14.5 billion, it's already valued at 46 times its projected sales for 2027. Looking back at Nvidia on the last day of fiscal 2014, it had a market cap of $8.8 billion -- which was less than 2 times the $4.7 billion in revenue it generated in fiscal 2015 and just over 1 time its $6.9 billion in revenue in fiscal 2017.

While IonQ is growing like a weed, it's priced for perfection in a bubbly market, but it hasn't proven that it can scale up its business or meaningfully narrow its net losses. IonQ is still a good speculative play on the long-term growth of the quantum computing market, but I wouldn't expect it to deliver Nvidia-like gains over the next decade.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends International Business Machines, IonQ, and Nvidia. The Motley Fool has a disclosure policy.