A number of corporations within the “Magnificent Seven” are investing closely in quantum computing, however one other participant within the background boasts a greater inventory worth return over the past 12 months than all of them.
When interested by quantum computing, names similar to Nvidia, Alphabet, Microsoft, or Amazon may come to thoughts. Every of those corporations has developed customized chips and software program centered on quantum computing expertise — offering them with much more alternative to dominate the factitious intelligence (AI) panorama.
However what if I instructed you that over the past 12 months, Nvidia is the one inventory on this peer set that has generated a greater complete return than the S&P 500 and Nasdaq Composite?
Past the megacap expertise shares, IonQ (IONQ -0.26%) has emerged as a budding alternative within the quantum computing realm. Over the past 12 months, IonQ inventory has risen by a staggering 432% — completely crushing the S&P 500 and Nasdaq indexes, which have risen by 11% and 13%, respectively.
Is IonQ inventory set as much as proceed beating the market? Learn on to seek out out.
IonQ inventory is scorching sizzling proper now, however…
It is vital to know that when a brand new megatrend emerges, particular person alternatives beneath the broader umbrella are likely to comply with. What I imply by that’s all through the AI revolution, traders have (for probably the most half) been following the identical subsectors similar to enterprise software program, cloud computing infrastructure, and semiconductor chips.
Whereas quantum computing is a gigantic market alternative, it is not precisely scaling on the identical tempo as chips or software program proper now. For that reason, I are likely to view quantum computing as extra of a stylish, new pocket of the AI realm that seems promising however has little traction to show it.
Not even a 12 months in the past, IonQ was buying and selling close to penny inventory ranges. Nonetheless, regardless of an almost sevenfold rise in its share worth, IonQ inventory is “solely” $45. Properly, sensible traders perceive that share worth is just one parameter when assessing an organization’s valuation.
Let’s dig into IonQ’s monetary profile to assist assess if the inventory is overvalued or buying and selling for an affordable worth.
Picture supply: Getty Pictures.
… does the valuation make any sense?
Over the past 12 months, IonQ generated $43 million in income. Certain, the corporate’s gross sales trajectory may look encouraging, however take a look at that money burn. Whereas raking in tens of hundreds of thousands in income, IonQ burned by greater than $300 million — and the development is getting worse!
IONQ Income (TTM) knowledge by YCharts
Regardless of this inverse relationship between gross sales and income, IonQ’s market cap has continued to soar. At an $11.7 billion market capitalization, IonQ at present trades for a price-to-sales (P/S) a number of of 238. That’s nearly tenfold the P/S ratio of Nvidia.
Is IonQ inventory a purchase proper now?
I believe IonQ is a speculative inventory to personal and its valuation appears unjustified to me. Whereas the inventory has outperformed the broader market over the past 12 months, I believe a lot of the rise within the share worth has to do with optimistic narratives surrounding quantum computing coupled with investor fatigue within the regular suspects (i.e., the “Magnificent Seven”).
Whereas I am intrigued by quantum computing, it is not an space that is enticed me sufficient to comply with the momentum at present fueling IonQ inventory to new highs. As a substitute, proudly owning shares similar to Nvidia, Amazon, Microsoft, Alphabet, and even IBM can present traders with publicity to quantum computing whereas additionally reaching some stage of insulation since you may be diversified in different areas of the broader AI market, too.
I’d cross on IonQ inventory proper now. Given its parabolic rise in such a short while body, I believe it is extra probably the inventory will take a breather relatively than proceed crushing the market.
Suzanne Frey, an govt at Alphabet, is a member of The Motley Idiot’s board of administrators. John Mackey, former CEO of Complete Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. Adam Spatacco has positions in Alphabet, Amazon, Microsoft, and Nvidia. The Motley Idiot has positions in and recommends Alphabet, Amazon, Worldwide Enterprise Machines, Microsoft, and Nvidia. The Motley Idiot recommends the next choices: lengthy January 2026 $395 calls on Microsoft and brief January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure coverage.
