Could buying this stock at a market cap of $7bn be like investing in Nvidia in 2010?

Any investor who bought $1,000 worth Nvidia (NASDAQ: NVDA) stock in 2010 and continued to climb to now sit at around $400,000!

But it’s unlikely that Nvidia will make everyday investors rich from early today. That’s because while its flagship chips are needed to train and run Artificial Intelligence (AI) systems, Nvidia now has a staggering $3.6trn market cap.

This makes it the largest company in the world.

In addition, the company is facing increasing competition from its cloud platform customers, who are developing AI chips in-house.

Therefore, investors looking for the potential ‘next big thing’ may want to consider quantum computing.

New calculation mode

If quantum computing sounds difficult to understand, that’s because it is (or at least it is for me).

As I see it, it’s like a normal computer on steroids. Instead of using boring old 1s and 0s (bits), these computers use qubits that can be 1, 0, or both at the same time.

Confused? Yeah me too, a little bit (no pun intended).

However, most of the tech giants are pouring money into this area, including AlphabetsGoogle and Nvidia. And it’s easy to see why, given some of the potential use cases for this disruptive technology:

• In the discovery of drugs, there may be rapid breakthroughs in diseases such as cancer or Alzheimer’s.
• Design new materials with higher properties (ie, stronger or lighter).
• Quantum computers can crack traditional encryption methods in seconds, making current cybersecurity obsolete.

The stock in question

Unfortunately, most of the startups in this burgeoning industry are yet to go public. But an interesting exception IonQ (NYSE: IONQ), currently has a market cap of $7bn (the same as Nvidia had in late 2010).

The stock is up 850% since the start of 2023.

Good commercial development

Quantum computers will have their ChatGPT moment.

IonQ CEO Peter Chapman

The company provides cloud-based access to its quantum computers through virtual platforms Amazon Brake and Microsoft Azure Quantum. Customers can pay for access to these resources to run their own algorithms and experiments.

IonQ also signs research partnerships. In Q3, it is partnered with AstraZeneca accelerating drug discovery and development, and a software firm Ansys. It works again At Hyundai in self-driving cars.

Revenue for the quarter rose 102% year-on-year to $12.4m, prompting management to raise full-year guidance to between $38.5m and $42.5m. And it expects full-year bookings of $75m to $95m.

Surprisingly, IonQ still generates losses, which adds to the risk here. It expects an EBITDA loss of around $110m in 2024.

However, it had $383m in cash at the end of September. That’s a three-year cash flight path at current rates, suggesting it’s well-funded.

It’s very speculative

Quantum computers are not widely used yet because they are difficult to scale and prone to errors. But they are expected to generate up to $850bn in economic value by 2040.

IonQ quantum computers use trapped ions as qubits, but competing methods exist. My concern ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​ has has has has has has has has has been a problem in the past.

Actually, I can’t judge that IonQ has a long-lasting competitive advantage. And this makes it very difficult to test whether it has the same capabilities as Nvidia.

With 177 eye-popping stock sales this year, I’m putting it in the toughest category right now. I don’t buy.