Better Artificial Intelligence Stock: IonQ vs. Nvidia

Since the launch of ChatGPT in late 2022, artificial intelligence (AI) has infiltrated various aspects of everyday life. In fact, AI regulations in the U.S. surged by 56% in 2023. This rapid growth has prompted companies to invest heavily in computer science to enhance AI technologies. Two key players in this domain are IonQ, a company specializing in quantum computing, and Nvidia, a prominent semiconductor manufacturer.

Both IonQ and Nvidia have made significant advancements in their respective technologies, positioning themselves well for future growth. IonQ's stock has appreciated by about 140%, while Nvidia's shares soared approximately 180% in 2024 alone.

But which of these companies represents a better long-term investment for those looking to benefit from the AI trend? Let's take a closer look at the two companies.

A look at IonQ's quantum tech

IonQ stands out as a compelling investment opportunity due to its focus on quantum computing, which has the potential to elevate AI capabilities beyond what traditional supercomputers can achieve. Quantum computers leverage subatomic particles, enabling them to solve complex problems in seconds—tasks that might take conventional computers years.

Though IonQ competes with other firms in the quantum computing space, it has addressed major industry hurdles. Typical quantum systems must operate at extremely low temperatures to maintain stability; however, IonQ's technology functions effectively at room temperature. This unique advantage has allowed IonQ to partner with notable organizations, such as Oak Ridge National Laboratory, which is utilizing its quantum machines to improve the U.S. power grid.

IonQ experienced impressive revenue growth, with sales increasing by 102% year-over-year to $12.4 million in the third quarter. Additionally, the company recorded $63.5 million in new customer bookings during the same period.

Despite its strong sales, IonQ has not yet turned a profit. In the latest quarter, the company reported a net loss of $52.5 million, higher than the previous year's loss of $44.8 million, largely due to $33.2 million spent on research and development. Even with these losses, IonQ is enhancing its technological edge—a recent move saw it acquire Qubitekk, a quantum networking firm. This acquisition aims to facilitate the networking of its quantum systems, mirroring the effect seen in traditional computing.

Nvidia's strengths in AI

Nvidia's business has thrived in the wake of AI's rise, with companies and governments eager for its high-performance semiconductor chips. Reports suggest that ChatGPT itself was powered by approximately 10,000 Nvidia chips.

Nvidia's chipsets, particularly its graphics processing units (GPUs), are in high demand because they are specifically designed for AI tasks. These chips excel in processing large datasets quickly and efficiently.

The company's financials underscore this demand, with record revenues of $35.1 billion reported for its fiscal Q3, which ended on October 27—an astonishing 94% increase year-over-year. Moreover, Nvidia's net income for that quarter hit $19.3 billion, a remarkable rise of 109% compared to the previous year.

Looking ahead, Nvidia's state-of-the-art Blackwell platform, tailored specifically for AI's demanding computational needs, has the potential to take the company even further. Each Blackwell GPU boasts over 200 billion transistors, and management reports that demand for these chips outpaces supply. Notable clients, including Taiwan and Japan, are constructing AI supercomputers using the Blackwell platform.

As a result of this robust demand, Nvidia anticipates that its Q4 revenue could reach around $37.5 billion, showcasing a significant increase from last year's $22.1 billion.

Choosing between IonQ and Nvidia

Both IonQ and Nvidia present solid investment cases, thanks to their innovative technologies. However, there are vital factors to weigh when selecting between the two.

Nvidia's Blackwell platform is capable of simulating quantum computer capabilities as current quantum machines often operate under time limits due to the instability of subatomic particles. Because of this, quantum computers won't replace traditional machines like Blackwell in the short term.

In the long run, though, experts anticipate that quantum computers will achieve what’s known as quantum advantage, signifying a point when they can perform calculations that are unattainable for classical machines. This might not occur until after 2030, suggesting that IonQ's technology could take several years to surpass Nvidia's capabilities, making IonQ a riskier investment.

Additionally, the valuations of both companies are worth mentioning, as their share prices have soared this year. By examining their price-to-sales ratios (P/S), which reveal how much investors are willing to pay for each dollar of sales, one can see that IonQ's P/S has rapidly risen, rendering its stock potentially overvalued in comparison to Nvidia.

In concluding this analysis, the more appealing investment option is clear when considering three key factors:

• IonQ's stock may be overhyped.
• Nvidia's profitability and the remarkable demand for its Blackwell platform are increasing.
• IonQ's technology might take years to achieve widespread utilization.

Among these two pioneering enterprises, Nvidia appears to be the better investment choice within the dynamic AI sector.

Disclaimer: The author holds positions in both IonQ and Nvidia. This article does not constitute financial advice.

AI, Investing, Technology