Why Did IonQ Stock Bounce Back Today?
Key Points
IonQ sold off on no bad news for IonQ last week.
Interest rate concerns and worries over AI demand nonetheless hurt the stock, and these persist.
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Easy go, easy come.
Shares of IonQ (NYSE: IONQ), the quantum computing start-up, crashed alongside everything else "tech" last week, closing the week down a staggering 21.2%. When this happened, I had a few encouraging words for investors: there was no specific bad news about IonQ.
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Today, it seems many are coming around to this view -- and IonQ stock is bouncing back 10.5% through 11:55 a.m. ET.
Image source: Getty Images.
No bad news for IonQ stock
No bad earnings reports. No analysts downgrading IonQ. None of the usual causes of a single-stock sell-off dogged IonQ last week. What did convince investors to sell the stock were a couple broader concerns.
Broadcom (NASDAQ: AVGO) warned that its AI chip sales in Q3 might come in a bit lighter than analysts expected (sparking worries over the durability of artificial intelligence demand). Separately, a strong employment report torpedoed "hope" that the economy might be weak enough to force the Federal Reserve to cut interest rates at its next meeting.
With inflation still running hot and 172,000 jobs created in May, though, this probably won't happen. In fact, we can't rule out the possibility the Fed will raise interest rates.
What this means for IonQ stock
Here's why that's bad news for IonQ: High interest rates raise borrowing costs for unprofitable companies like IonQ. Although IonQ has plenty of cash now, it's expected to burn through nearly $900 million in cash over the next few years -- and once that money is gone, IonQ may need to borrow again.
It's not an immediate concern. It's not a reason to panic and sell IonQ immediately. But it is something to keep an eye on. Sooner or later, this company needs to earn a profit, or interest rates are going to start to bite.
Should you buy stock in IonQ right now?
Before you buy stock in IonQ, consider this:
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Broadcom and IonQ. The Motley Fool has a disclosure policy.
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