To The Moon

The search for the "next Nvidia" in quantum computing is understandable, given Nvidia's meteoric rise fueled by the AI revolution. However, it is crucial to understand that quantum computing is at a much earlier stage of commercialization than AI, and therefore, the investment landscape is significantly different and carries much higher risk.

Nvidia's success stems from its early and dominant position in GPU hardware, which became the foundational "picks and shovels" for AI training.

To find a similar trajectory in quantum computing, we need to identify a company that could similarly dominate a crucial, scalable, and high-demand aspect of the quantum stack.

In this article, I would like to share an analysis of which public quantum computing stocks might have the potential to follow an Nvidia-like path, along with the significant caveats:

Quantum Computing Landscape and Challenges

Nascent Stage: Quantum computing is still largely in the research and development phase. Commercial applications are limited, and full fault-tolerant quantum computers (which will unlock the most transformative applications) are still years, if not decades, away.

Technological Diversity: There are multiple competing qubit technologies (superconducting, trapped-ion, neutral atom, photonic, topological, etc.). It's unclear which will become dominant or if a hybrid approach will prevail.

High Costs and Technical Hurdles: Building and operating quantum computers is incredibly expensive and complex. Challenges include decoherence (qubits losing their quantum state), error correction (which requires many more physical qubits than logical qubits), and scalability.

Talent Shortage: There's a significant global shortage of quantum scientists and engineers.

Uncertain Profitability Timeline: Most pure-play quantum computing companies are heavily investing in R&D and are not yet profitable, nor are they expected to be for several years.

It is difficult to argue that quantum will follow a similar evolution as semiconductors did from the 1950s until now. The technologies are very different. There is no defined architecture like the one von Neumann defined for classical computers.

Public Quantum Computing Companies with Potential (and Caveats)

Given the above, identifying a single "Nvidia" is highly speculative. However, here are the leading public pure-play and diversified companies with significant quantum efforts, along with their potential "Nvidia-like" angles:

1. IonQ (IONQ)

The "Nvidia" Pitch: IonQ (IONQ) is often cited by its CEO and some analysts as a potential "Nvidia of quantum computing." They are a pure-play quantum computing company focused on trapped-ion technology, which boasts some of the lowest error rates for small systems. They offer their quantum systems via major cloud providers (AWS, Azure, Google Cloud), similar to how Nvidia's GPUs are accessible in the cloud. They are also developing a full-stack approach (hardware and software).

Why it could follow Nvidia: Pure-play focus: Their success is directly tied to quantum computing's commercialization, offering high leverage if the industry takes off.

Technological leadership: Trapped-ion technology is a strong contender for future scalable quantum computers, with good coherence times.

Cloud accessibility: Making their quantum computers available through major cloud platforms broadens their potential customer base.

Strong partnerships: They've announced partnerships with major companies like Airbus, GE, Hyundai, and Nvidia itself.

Significant Caveats:

Early revenue: While growing, current revenue is still very small ($43M forecast for FY2024, rising to $750M by 2029, but still expected to be unprofitable in 2029). Nvidia was profitable relatively early in its journey.

Valuation: IonQ's market cap is already significant for a pre-profit company, reflecting high speculative interest.

Technology risk: Trapped-ion technology, while promising, is not guaranteed to be the ultimate winner.

2. $D-Wave Quantum Inc.(QBTS)$

The "Nvidia" Pitch: D-Wave was an early pioneer in quantum computing, focusing on quantum annealing (optimization problems) rather than universal gate-based quantum computing like most others. They have paying customers and have been selling quantum systems for a longer period.

Why it could follow Nvidia:

Commercial traction: They have a longer history of generating revenue and working with enterprise customers on real-world optimization problems.

Specialized niche: Quantum annealing could find widespread adoption for specific industrial optimization challenges.

Significant Caveats:

Limited scope: Quantum annealing is not a universal quantum computer, which limits its application compared to gate-based systems.

Competition: Even in optimization, there are other approaches and strong classical algorithms. Profitability: Still not profitable, though recent revenue growth is strong.

3. $Rigetti Computing(RGTI)$

The "Nvidia" Pitch: Rigetti is a full-stack quantum computing company specializing in superconducting qubits. They aim to deliver scalable quantum computers and have built a quantum cloud service.

Why it could follow Nvidia:

Full-stack approach: Controls both hardware and software, similar to Nvidia's integrated approach. Superconducting qubits: One of the leading qubit technologies, though very challenging to scale.

Significant Caveats:

Competitive landscape: This is a very crowded space with major tech giants also pursuing superconducting qubits.

Financial stability: Has faced significant financial challenges and dilution.

4. $Quantum Computing Inc.(QUBT)$

The "Nvidia" Pitch: Focuses on quantum software and optics, aiming to make quantum computing more accessible.

Significant Caveats: Much smaller market cap and earlier stage than the others mentioned, with higher inherent risk.

5. Diversified Tech Giants (IBM, Google, Microsoft, Honeywell, Nvidia itself) These companies are investing heavily in quantum computing, often with multiple research initiatives and different qubit technologies.

Why they are safer bets (but not "Nvidia-like" pure plays)

Vast resources: Can sustain long-term R&D without immediate profitability.

Diversified revenue: Quantum computing is a small part of their overall business, making them less volatile due to quantum setbacks.

Synergies: They can integrate quantum capabilities into their existing cloud platforms (Azure Quantum, Google Cloud, IBM Quantum Experience).

Nvidia (NVDA): While best known for AI, Nvidia is also making moves in quantum, developing quantum research centers and providing tools for quantum simulation. If quantum computing ever requires specialized classical processors for control or simulation, Nvidia could again be a "picks and shovels" provider.

Why they are not the "next Nvidia" in quantum: Quantum computing would need to become an enormous, standalone business unit to have a similar stock price impact on these multi-trillion-dollar companies. The growth wouldn't be as leveraged as it would be for a pure-play quantum company.

Conclusion and Investment Advice

No quantum stock currently has the same clear path to "Nvidia-like greatness" as Nvidia did with AI. The quantum computing industry is still in its infancy, grappling with fundamental scientific and engineering challenges. It's more akin to the early days of personal computing or the internet – the potential is enormous, but the winners and the exact path to commercialization are highly uncertain.

A “Pure-Play” Pick Contender

As mentioned above, if we really need to go pick a "pure-play" contender based on current market perception and stated ambitions, $IONQ Inc.(IONQ)$ is the one most frequently mentioned as aiming for that position, due to its focus on full-stack ion-trap systems and cloud accessibility.

However, we as investors must approach quantum computing stocks with extreme caution:

High Risk, High Reward: These are highly speculative investments. Be prepared for significant volatility and the possibility of total loss.

Long Investment Horizon: This is a long-term play, likely decades, before widespread commercial viability and significant profits.

Diversification is Key: If you invest in quantum computing, it should be a small, diversified part of your overall portfolio, perhaps through a quantum-focused ETF to spread risk across different companies and technologies.

Do Your Due Diligence: Understand the different qubit technologies, the companies' specific approaches, their financial health, and their progress towards commercialization.

Technical Analysis - Exponential Moving Average (EMA) - Long Term - Monthly

If we looked at the monthly chart, we can see that there is a series of rising peaks (higher highs) and rising troughs (higher lows), this signal a bullish trend,

IONQ have been consistently above the long-term moving averages, like 20-months and 50-month, and we are also seeing IONQ on uptrend after the "golden cross" (shorter-term MA crossing above a longer-term MA) on the monthly chart which indicate a strong bullish signal.

Why I Took Position In IONQ

With the drop of 6.22% on Friday (30 May), this make IONQ share price attractive, and we are not seeing any decline in momentum, we are still within the resistance level, I believe we could be seeing a stronger performance next week (when we begin a new month in June).

We can see from the monthly chart that volume remains in the positive zone.

Summary

The "greatness" of Nvidia came from its hardware becoming indispensable to a massive, rapidly expanding market (AI). For a quantum company to replicate that, it would need to develop a similarly indispensable component or service that becomes the bottleneck or enabler for a vast quantum computing industry that does not yet fully exist.

Appreciate if you could share your thoughts in the comment section whether you think IONQ would be a front runner for the quantum computing industry and this is the best time to get in.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.