Better Artificial Intelligence Stock: IonQ vs. Nvidia

Key Points

• Shares of Nvidia and IonQ have each surged more than 800% over the past three years.

• Nvidia dominates the AI semiconductor market while IonQ is betting on quantum computing.

• Neither stock is cheap, but Nvidia's long-term prospects look far stronger than IonQ's.

With the share prices of so many tech companies surging lately, it's a good idea to turn a critical eye toward any stock you're considering buying. Two stocks that are no doubt on many investors' potential buying lists are Nvidia (NASDAQ: NVDA) and IonQ (NYSE: IONQ),

These companies have garnered lots of attention lately, especially as their share prices have risen 930% and 857% over the past three years, respectively. So, let's take a closer look at what's happening with these companies to determine which one looks like the better AI stock to own in early July, 2025.

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How Nvidia benefits from the AI boom

Nvidia quickly went from an obscure tech company that most people hadn't heard about to one of the most popular artificial intelligence investments in just a few years. The spike in interest has come from Nvidia's lead in designing semiconductors that are used in artificial intelligence data centers.

Nvidia's processors account for about 70% to 94% of the AI semiconductor market, and their popularity has pushed the company's sales and earnings up quickly. Nvidia's data center revenue spiked 73% in the most recent quarter to $39 billion, and earnings per share rose 27% to $0.76 per share.

There is some debate as to how much more semiconductor demand there will be in the coming years once tech giants have upgraded their old servers and built new ones to handle their AI needs, but that potential slowdown hasn't arrived yet. McKinsey research estimates that the semiconductor market will grow to $2.4 trillion by 2040, up from about $450 billion in 2019.

With Nvidia's semiconductor lead, the company is well-positioned to benefit if semiconductor demand remains. Still, one thing investors should be aware of is that Nvidia's stock isn't cheap. The rapid share price gains of the past few years mean that Nvidia's stock has a price-to-earnings ratio of about 50, which is below the current semiconductor company average of 64 but still pricey compared to the S&P 500's average of 24.

IonQ is on the fringes of AI

IonQ isn't actually an artificial intelligence company. It's a quantum computing company that uses trapped linear chain ions that have the potential to reach 100-plus qubits and produce far fewer errors than other quantum computers.

Where IonQ overlaps slightly with AI is that it offers some of its quantum computing services on Amazon's AWS and Microsoft's Azure cloud computing platforms, giving AI researchers access to quantum computing processing. Additionally, future developments in quantum computing could result in smarter AI models.

Investors have been pushing up IonQ's share price, hoping that quantum computing will eventually become a transformational technology. But most real-world applications -- like using it to discover new drugs or materials -- haven't happened yet. And even some companies heavily involved in developing their own quantum computers, like Alphabet's Google, have said commercial quantum computing applications are still at least five years away.

Still, the quantum computing market will be worth an estimated $2 trillion by 2035. This massive opportunity has helped fuel investor optimism in IonQ, but it's also resulted in making its stock extremely expensive. IonQ's price-to-sales ratio is an astonishingly high 217, far above the market's average or even other high-flying tech stocks.

Nvidia is the better AI stock

While Nvidia's share price isn't cheap, it's a far better value than IonQ's. Nvidia's lead in the artificial intelligence semiconductor market, its strong earnings and revenue growth, and its potential to continue tapping into the vast semiconductor market should continue to make Nvidia a good long-term investment.

And considering that it's more focused on AI than IonQ, Nvidia is easily the better artificial intelligence stock in this match-up.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.