Is It Time to Buy the Dip on IonQ Stock?

Quantum computing stocks have been on a wild ride over the past few weeks, with several days resulting in large gains and losses. One of the most watched stocks in this realm is IonQ (NYSE: IONQ), as it is one of the pure-play quantum computing leaders. Its stock is up about 50% year to date, although that figure was as high as nearly 100% a few weeks ago.

With IonQ's stock sitting well off its all-time high, is it time to buy the dip? After all, if IonQ's technology works out, it could be a massive winner.

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IonQ's technology gives it a leg up on the competition

There are several ways to approach quantum computing. The most popular technique is to cool a particle to near absolute zero, which slows down the movements enough to utilize its quantum mechanics to perform quantum computing with it.

IonQ doesn't use this technique; instead, it uses the trapped ion approach, which can be done at room temperature. As another benefit, this technique is inherently more accurate than the aforementioned superconducting method. This isn't a free lunch. While IonQ is a leader in accuracy, it sacrifices processing speeds to achieve better accuracy.

However, accuracy is the biggest problem every company in the quantum computing arms race is trying to solve. If IonQ can create an accurate and cheap solution faster than anyone else, it may be able to establish a first-mover advantage where its products become the standard. An advantage like that cannot be understated, and may be enough to push IonQ to victory over its peers.

There's no guarantee that this pans out, as IonQ is going up against some stiff competition. In addition to other quantum computing pure-play companies, there are also legacy tech players like Alphabet, with which IonQ has to compete. Alphabet has enough cash flow to be able to invest in whatever it pleases, and could easily outspend IonQ to reach quantum computing supremacy first.

On the flip side, Alphabet's stock doesn't have as much upside as quantum computing pure plays do due to its size. Quantum computing will be a nice business builder for Alphabet, but it's the only thing that matters for IonQ. Time will tell if IonQ can succeed in this race, but IonQ is still leading the pack in terms of computing accuracy.

IonQ just set another world record

Because IonQ is the current accuracy leader, it should come as no surprise that it is consistently setting world records for the most accurate quantum computer. Recently, it announced that it had achieved 99.99% two-qubit gate fidelity performance, which is the most common measure of accuracy for a quantum computer. This means that the device made one error in 10,000 attempts.

IonQ believes it has now achieved the level of performance necessary to produce a computer with one million qubits that can deliver commercially viable results by 2030. This is a big deal and shows that IonQ is a leader in this race. But is it enough to buy the stock?

It's impossible to estimate what the real value of quantum computing will be years down the road. While 2030 is commonly pointed to as a turning point for the technology, it could be years after that before we see widespread adoption and mass replacement of traditional computing devices. Furthermore, the advantage of these computers may be overstated right now, and this market may never emerge.

Additionally, just because IonQ is leading right now doesn't mean it will maintain that position over the next five years. A roadblock could come up or someone else could have a groundbreaking discovery, and bump IonQ from atop its quantum computing throne.

This makes IonQ a high-risk, high-reward investment as it could easily go to $0 if it doesn't win the quantum computing arms race. There's still a lot of time between now and when quantum computing will become commercially viable. A significant market downturn could occur over that time frame, opening up a better buying opportunity for IonQ. I think investors can be patient, as there is still a ton of hype baked into quantum computing stock prices right now, and there will likely be better opportunities that emerge over the next few years.

Keithen Drury has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.