Superior AI Investment Option: IonQ overtakes Nvidia
Since the explosion of ChatGPT in the autumn of 2022, AI has become increasingly intertwined with various societal facets. As a result, U.S. regulations regarding AI have witnessed a significant rise by 56% in 2023.
Now, corporations are dedicating a considerable part of their computer science resources to catalyze AI's progress. Two prominent firms spearheading this shift are IonQ, a quantum computing company, and tech giant Nvidia.
Both firms have showcased groundbreaking innovations that have elevated their stocks. By December 11, IonQ's shares had surged approximately 140% in 2024, and Nvidia's had risen approximately 180% during the same period.
But, which company offers a better long-term investment highlighting AI's secular trend? In the following sections, we'll explore both companies to answer this question.
IonQ's Quantum Breakthroughs
The allure of IonQ as an investment lies in the promise of quantum computing to surpass AI capabilities beyond those of the most formidable supercomputers. Quantum computers utilise subatomic particles to gallop through complex calculations that would take traditional computers centuries to complete in mere seconds.
While numerous companies are working on quantum computing, IonQ stands out because of its revolutionary technology. For instance, IonQ's platform operates at room temperature, unlike many competitors that rely on the frigid temperatures often colder than outer space.
By overcoming these challenges, IonQ has gained prominent clients such as Oak Ridge National Laboratory, which is using IonQ's quantum computers to modernise the U.S. power grid. Consequentially, IonQ's customer base has expanded rapidly, fueling substantial revenue growth for the company.
In the third quarter, IonQ's sales surged by 102% year over year to $12.4 million. Moreover, the company clinched $63.5 million in new customer bookings during the same period.
However, IonQ is far from turning a profit. It reported a net loss of $52.5 million in Q3, up from $44.8 million in the previous year. This was due to its substantial investment in research and development, which amounted to $33.2 million.
In an attempt to bolster its technological edge, IonQ recently announced its acquisition of quantum networking company Qubitekk. IonQ aims to emulate the network effect in its quantum machines by leveraging Qubitekk's technology, which relies on the power of networked computers to expedite AI tasks.
Nvidia's AI Dominance
Nvidia's fortunes have been bolstered by the AI boom, as companies and governments have demonstrated an unquenchable thirst for its semiconductor chips. For instance, some estimates suggest that ChatGPT leveraged 10,000 Nvidia chips in its development.
Nvidia's products are particularly popular in AI applications due to its specialised chips known as graphics processing units (GPUs). These GPUs provide AI systems with the necessary computer processing power to exploit mountains of data to swiftly carry out tasks.
Nvidia's business continues to thrive, as evidenced by its fiscal Q3 revenue hitting a record $35.1 billion, a 94% increase over the previous year. Q3 net income also rose dramatically, reaching $19.3 billion—a 109% year-over-year increase.
However, the company's latest technology may propel it to unprecedented heights. Its Blackwell platform is designed to cope with the advanced computing requirements of AI systems. According to Nvidia, this platform pushes the frontiers of scientific computing since each of Blackwell's GPUs boasts over 200 billion transistors.
Due to the intense demand for Blackwell, Nvidia management predicts Q4 revenue to reach around $37.5 billion, marking a substantial raise over the previous year's $22.1 billion.
Deciding Between IonQ and Nvidia
Both companies have compelling arguments to warrant investment. To make an informed choice, consider the following factors:
Nvidia's Blackwell platform is so powerful that it can emulate the computing capabilities of quantum computers. Nonetheless, with quantum machines constrained in their ability to perform calculations before the subatomic particles degrade, quantum computers won't supersede classical computers, like Blackwell, in the near future.
Over the long term, however, quantum computers are expected to surge ahead due to their potential to offer quantum advantage, a term indicating when classical computers can no longer keep up with quantum machines. As a consequence, IonQ's technology may not reign supreme over Nvidia's until years down the road, making IonQ a more speculative investment.
Moreover, considering the skyrocketing shares of both companies, valuation plays a crucial role. The following table offers a breakdown of their price-to-sales (P/S) ratios, which indicate the price investors are willing to pay for each dollar of a company's sales.
As the table reveals, IonQ's P/S ratio has experienced a dramatic surge in recent weeks and is now significantly higher than Nvidia's. This suggests that Nvidia shares represent better value.
Upon considering these factors, multiple aspects become clear:
- IonQ's stock has become overvalued.
- Nvidia's profitability and demand for its Blackwell platform are on an upward trend.
- IonQ's technology may be years away from widespread adoption.
Between these two innovative firms, Nvidia emerges as the superior investment choice in the captivating realm of artificial intelligence.
In light of their financial performances and technological advancements, both IonQ and Nvidia have seen significant growth in their stock prices. As of December 11, 2024, IonQ's shares had increased by approximately 140% due to its promising quantum computing technology, while Nvidia's shares had risen by around 180% due to the high demand for its AI-focused semiconductor chips. However, considering the current market valuations and the future outlook, Nvidia's P/S ratio is more affordable compared to IonQ's, suggesting that Nvidia's shares may offer better value for investors looking to capitalize on the AI trend.
Given that IonQ's quantum computing technology is still in its infancy and may not surpass classical computers, such as Nvidia's Blackwell platform, for several years, the investment in IonQ may be considered more speculative. However, upon careful analysis of their financial and operational performances, Nvidia's proven profitability and increasing demand for its advanced AI technologies make it a stronger choice for long-term investors interested in the AI sector.
