Down 40% From its All-Time High, Is Now the Perfect Opportunity to Load Up on This Quantum Computing Leader?

IonQ (NYSE: IONQ) is a fairly risky and volatile stock, as investors don't quite know what to think of it. It's an early-stage pure-play quantum computing company that is far from sustainable as a business right now.

It's actively working on improving its quantum computing solution to the point where it will be commercially viable. However, it's not there yet. As a result, the stock often rises and falls based primarily on the market's changing risk appetite. Currently, we're in a falling cycle, and the stock is down by around 40% from the all-time high it touched in October.

That's a pretty deep discount from where it was trading, but is it a bargain buying opportunity, or was that move just an accurate repricing of a risky stock?

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Pursuing an unusual quantum computing technology

There is no single established way to create the qubits that are the fundamental units of any quantum computer. In fact, there are at least nine. The one commonality shared by all of the underlying technologies is that they create isolated systems that are governed strictly by quantum mechanically properties.

One of the most common technologies being pursued uses superconducting qubits. To make those, the electrical circuits at the heart of a quantum computer must be cooled to a temperature just above absolute zero. IonQ's trapped-ion process is different. Instead of supercooling entire circuits (and all the machinery around them), each qubit is made from a single atom that is supercooled using lasers. These charged atoms, which are trapped and isolated in an electric field, can then be used to perform quantum calculations.

This method has delivered more accurate calculations than rival techniques: IonQ holds the world's record for 2-qubit gate fidelity, at 99.99%. This indicates that IonQ's computer will make an error once every 10,000 operations. While that may sound impressive, such computers now perform thousands of operations per second, and these errors can accumulate to produce incorrect results. Moreover, classical computers like the ones we use every day only make such errors at frequencies of around 1 per quadrillion operations. Quantum computers have a long way to go.

The error reduction and error correction puzzles are among the main roadblocks every quantum computing developer faces. Until they come up with commercially viable systems that have the scale and accuracy to compete with traditional computing hardware, quantum computing will largely be more of a science experiment.

However, IonQ is inching closer to that goal with its 256-qubit system, and it has already sold one of them. IonQ is seeing increasing demand for research partnerships, which are driving its sharp revenue growth. Its top line rose 755% year over year in Q1. However, that revenue figure was still just $64.7 million, while its adjusted EBITDA loss was $96.8 million. Only time will tell how this pans out, but investors still need to know whether now is the time to buy.

IonQ is a risky stock with a high likelihood of failure. If you're risk-averse and don't want to get involved with an investment that has a real possibility of going to $0, IonQ isn't the stock for you. But if you can stomach some risk and believe in IonQ's approach, I think it can be a worthy investment. Just be sure to keep your position sizing small enough that even the company's outright failure wouldn't do too much damage to your portfolio's overall returns.

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