IonQ Stock: Building Technology For Quantum Computing

Summary

I believe IonQ (NYSE:IONQ) is worth a lot more than it is today. The company's innovative usage of trapped ions sets it apart from the competition and demonstrates its commitment to developing state-of-the-art scientific solutions for tackling society's most serious concerns. While there is great potential due to high barriers to entry because of technological complexity, there are also risks associated with uncertainty because the industry is just getting started and requires substantial financial investment.

Company overview

IONQ is conducting research and development of technologies for quantum computers with increasing levels of computational capabilities. The company also offers customers access to a quantum computer with 11 qubits. Access to IonQ's quantum computers is now offered to a select group of customers via the company's own cloud service, in addition to AWS, Azure, and Google's Cloud Marketplace, which are three of the most widely used cloud computing platforms.

Quantum is the future

In the classic binary system, data is stored in "bits," each of which can take the logical form of either a "0" [OFF] or a "1" [ON]. Information is utilized in a very different manner in quantum computing as compared to classical computing. The building blocks of quantum computers are quantum bits (qubits), which can be in either the 0 or 1 unit (superposition). Because of this, I believe quantum computers can tackle some tough problems that traditional computers might never be able to. The fact of the matter is that classical computing is no longer the best way to simulate quantum systems, break encryption by factoring numbers, or solve hard optimization problems.

I believe there's a huge window of opportunity here. Some of society's most serious problems may have solutions that can be found in quantum technology, including how to live sustainably on Earth, how to treat diseases, and how to transfer people and products quickly and inexpensively. The calculations needed to resolve these problems would take too long on even the most advanced classical computers, and the complexities of the quantum systems involved would make it impossible to represent them on a classical computer. Although current quantum computers are unable to solve these problems, IonQ believes that a quantum computer may provide the best possibility for processing capacity that might be used to address these issues.

Creating a computer with a much larger number of qubits than IonQ's present computers is crucial to the future of quantum computing, and there is no doubt in my mind that IonQ will overcome these obstacles.

IONQ trapped ion approach sets it apart

For its practical quantum computers, IonQ has adopted the aforementioned atom-based approach, with trapped atomic ions serving as its primary qubits. To scale its quantum computers, IonQ is working toward developing a modular computing architecture. This means that, if the company is successful, individual quantum processing units will be joined to construct systems with a growing amount of computing capacity.

I do want to highlight that I am not a subject matter expert and that I have much more to learn in this field. Below are some key advantages that I have figured out based on what I understand:

1. When atoms are used as qubits, each qubit is 100% quantum-perfect and identical to the others. When it comes to other quantum systems, however, many use fabricated qubits, which create imprecision as no two qubits in the system are identical. Since systems that must rely on the qubits' fabrication are more prone to inaccuracy, I believe IonQ has the upper hand.
2. The quantum state of a system loses its computational utility as it interacts with its surroundings, causing the collapse of the quantum wave function. In contrast, the electric forces that confine trapped ion qubits to their tiny chamber in an ultra-high vacuum [UHV] ensure that their internal qubits remain isolated from any outside influence. Thus, trapped ions can maintain their coherence for up to an hour, and perhaps even longer with advancements in isolation technology. This is very important for large-scale quantum computers, in my opinion, because with longer coherence times, more calculations can be done before noise stops the quantum calculation.
3. To operate with little interference and noise, solid-state qubits now need to be kept at temperatures near absolute zero. As a result of the need for costly and space-consuming dilution refrigerators to maintain the required temperature, the long-term scalability of a system may be constrained. Systems using trapped ions, on the other hand, can function at ambient temperatures. By using low-power lasers within a small vacuum chamber, the trapped ions can be cooled without having to do anything to the chip itself, as is the case with most other solid-state devices. I believe this is quite a distinct point, as it will enable IonQ to reduce the overall footprint of the system as technology improves, while also increasing performance and decreasing costs.
4. Since individual qubits in superconductive and other solid-state architectures are connected via physical wires, communication between any two distant qubits must first pass through the intervening qubits. To counter this, the trapped ion technique uses electrostatic repulsion to link qubits together instead of actual wires. Since this is the case, any qubit in an existing IonQ system can have a one-to-one interaction with any other qubit. I believe this flexible way of connecting things makes it much easier to build any quantum circuit in IonQ's modular architecture.

High barriers to entry due to technological complexity

Despite the advantages, the trapped ion method presents several difficulties that act as barriers to entrance, which works in IonQ's favor.

The variety of lasers needed and the degree to which they must be stable is one of the obstacles to trapped-ion quantum computing. These laser systems were traditionally pieced together on an optical table, which introduced significant stability and reliability concerns. In addition, to create ultra-high vacuum conditions for ion trapping research, the standard approach is to use a vacuum chamber designed with specific materials, assembled with complicated electrical connections, and conditioned by preheating and baking the chamber for long periods. IonQ has developed new methods that it claims will drastically cut down on the time and money needed to get the UHV environment ready for quantum computer operation.

Moreover, even with the highest fidelity entangling gates, developing a control scheme that allows all qubits in a system to form gates with each other under full software control is a significant technological challenge. IonQ says that its innovations in gate implementation protocols and laser delivery and control technologies allow it to make fully programmable, fully connected gate schemes in its system.

There is a common misconception that trapped ions have slower gate speeds than their solid-state analogs. Although slow gate speeds are typical for many existing systems, theoretical studies and practical evidence (cited from IONQ S-1) suggest this may not be an inherent limitation of trapped ion qubits (I should point out that this has yet to be shown in commercial applications). In fact, some academic labs have realized high-fidelity gates with speeds rivaling those of solid-state qubits. IonQ also thinks that the overall computation time of systems using other qubit technologies will slow down a lot as they get bigger because they only have a few connections and have to pay a lot to fix mistakes. This makes the trapped ion approach more competitive.

Valuation

I believe the current valuation does not reflect IONQ's potential value. Given that IONQ has not generated any meaningful revenues and the industry is so new, I used management's long-term guidance as a yardstick to how much IONQ could be worth.

I expect IONQ to make $522 million in sales in FY26, giving it a market cap range of $2 billion to $4.5 billion and a stock price range of $9.89 to 23.01 in FY25.

Assumptions:

1. Sales will meet management's projections in FY26
2. IONQ to trade within a range of 3x to 8x forward revenue multiple. As there are no direct comparable, I used AMD and NVDA revenue multiple to benchmark

Risk

Quantum is the future? Who knows

IonQ is working on its next-generation 32-qubit quantum computing technology, which will not be offered to users for some time. It is possible that this version of the quantum computer system would not be ready for customer use or independent third-party verification for a long time or that it may never be developed at all.

A lot of capital is being invested in this industry

The global quantum computing market is highly competitive, and it is possible that IonQ will not be able to impress and sustain a sense of optimism in its current and potential business allies and clients. Google (GOOGL), Microsoft (MSFT), and Amazon (AMZN) are some other major players in the industry.

Conclusion

I believe IONQ is worth a lot more than it is today. IonQ belongs to a unique industry that studies and advances quantum technologies, and its founders see quantum computing as the wave of the future. The company is dedicated to perfecting cutting-edge scientific methods to address society's most pressing issues, and it stands out from the competition because of its unique approach to using trapped ions. Remember that while there is a massive opportunity because of the high barriers to entry owing to technological complexity, there are also dangers connected with uncertainty as the business is still in its infancy and calls for huge capital expenditure.

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