Meet the Once-in-a-Generation Stock That Could Dominate Quantum Computing

Key Points

• Quantum computing is an incredibly risky investment sector.

• IonQ's trapped-ion approach has benefits and drawbacks compared to more common computing methods.

• 10 stocks we like better than IonQ ›

While artificial intelligence (AI) investing is the prevailing theme in the market, another massive industry is poised to take off: quantum computing.

This could be the next major investment theme, and getting in on it now can yield investors incredible returns. However, it's also an incredibly risky area, so investors must take care to position themselves wisely.

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One stock that I think has the potential to dominate the quantum computing landscape is IonQ (NYSE: IONQ). IonQ is one of the leading pure-play quantum computing companies and has several exciting technologies already in use.

I believe this could be a generational investing opportunity, and investors should consider IonQ due to its significant upside potential.

Image source: Getty Images.

Quantum computing has multiple use cases

Quantum computing excels in areas where traditional computing methods fall short. Because traditional computing is performed with bits, which transmit information as 0s or 1s, quantum computing's qubits are better described as the probability of a calculation yielding a 0 or a 1. This allows for an infinite number of solutions, making quantum computing particularly effective at problem sets that don't have a specific answer.

Quantum computing can be utilized for AI model training and inference, logistics networks, weather predictions, and numerous other applications. While people may not be walking around with quantum computing smartphones anytime soon, numerous applications make quantum computing a viable investment sector.

There are also numerous competitors within this space. Many of the major tech companies, with nearly unlimited resources, have significant investments in quantum computing. IonQ is fighting an uphill battle against these established players, but I think it can carve out a niche for itself thanks to the approach it's taking.

IonQ's approach to quantum computing differs from its competitors

While most major tech companies are developing their quantum computing technologies using a superconducting method, IonQ is pursuing a trapped-ion approach. This comes with two major advantages. First, superconducting quantum computers require cooling a particle to nearly absolute zero, which is an expensive process. IonQ's trapped ion approach can be performed at room temperature, which makes it significantly more cost-effective.

Another advantage of this technique is superior accuracy. IonQ's qubits can be easily interconnected, which enhances calculation accuracy. IonQ holds world records for both one-gate and two-gate calculation fidelity, showcasing its extreme accuracy. This is a significant hurdle that quantum computing companies must overcome before the technology becomes relevant. With IonQ's technology being inherently more accurate due to the technique used, this gives it a competitive advantage.

There is one drawback to the trapped-ion approach, and that is the processing speed. Trapped-ion systems process calculations more slowly than their superconducting counterparts, but I believe the market is more likely to adopt a cheaper and more accurate solution initially, which will enable IonQ to achieve first-to-market status before the competition. This could be the head start IonQ needs to outperform some of its larger competitors.

While this is exciting for IonQ, it will be some time before quantum computing becomes commercially relevant. Most companies point to 2030 as a turning point for the technology, and IonQ is no different. IonQ's CEO, Peter Chapman, believes that IonQ will generate nearly $1 billion in annual revenue and be profitable by 2030. If IonQ achieves this and continues to grow into a massive market opportunity, it has the potential to be a significant winner for early investors.

However, there's no guarantee that IonQ's technology will be the winning approach or that quantum computing will become commercially viable at all. As a result, investors must balance that risk with portfolio sizing. By keeping IonQ as a relatively small position (no more than 1% of the total portfolio value), investors can capitalize on the upside while limiting the overall portfolio's impact if it goes bust.

IonQ is a worthy long-shot investment if the position sizing is right, and I think it could have immense upside if it achieves quantum computing supremacy. But that's a big if.

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Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.