Investors heard the message loud and clear on Thursday as NVIDIA’s (NVDA) CEO, Jensen Huang, said “If you said 15 years for very useful quantum computers, that would probably be on the early side,”.
Huang followed-up with “If you said 30, it’s probably on the late side. But if you picked 20, I think a whole bunch of us would believe it.”
While Huang’s comments have some truth to them, he and investors should remember one of the most important pillars of the stock market, Speculation.
The stock market is built on speculation. Higher prices happen because investors speculate on an industry, company, theme or product, even when that product is only in development.
NVIDIA is a great example of this. Investors piled into the stock after the company hinted that they were in the development phase of the newest Blackwell chip. That was in 2022.
That sheer speculation was based on a product that was still more than a year away from reality.
There are plenty of examples through time of this exact situation, just ask anyone that bought and held shares of Amazon when it was just an online book retailer in the 1990s. We’ll look at Amazon’s “Discovery Phase” compared to quantum computing company IonQ Inc. (IONQ) below in a minute.
There’s a simple rule that applies to companies that are in “Discovery” mode…
Investors speculate on what a company may become, not necessarily what it is.
Quantum computing is far from a new concept, but it has only recently become feasible due to advances in technology.
The foundational ideas of quantum computing trace back to the 1980s, when physicists like Richard Feynman and David Deutsch proposed using quantum mechanics to process information.
The field remained largely theoretical for decades because of technological limitations.
Practical progress began in the late 1990s and early 2000s with the development of quantum algorithms (e.g., Shor's algorithm for factoring numbers) and the construction of simple quantum systems.
Advances in hardware, such as superconducting qubits and ion traps, have made small-scale quantum computers a reality.
Companies like Google, IBM, and IonQ are now working toward scaling quantum systems to solve practical, real-world problems, making it an increasingly relevant and exciting area of opportunity and innovation.
Discovery mode for a stock refers to the phase when a company's stock gains increased attention from investors, often due to news, events, or breakthroughs that highlight its potential.
During this period, trading volume and volatility typically increase as new investors enter the market.
Discovery mode can lead to significant price movements, driven by speculation, emerging trends, or sector growth. It’s an exciting but risky phase, requiring careful attention to the outlook of the stock's fundamentals and market dynamics.
Once again, it is always important to remember that stocks in Discovery Mode will see much more volatility and be more sensitive to technical price action.
From a fundamental perspective, IonQ is in the early stages of Discovery.
The company’s stock started trading at $11.13 in January 2021. In late 2021 IonQ saw a 250% rally as the company announced partnerships with major cloud providers like Microsoft Azure and Amazon Web Services. The announcements and IonQ’s product development increased confidence in its commercial viability and ability to generate revenue through quantum computing services.
In the third quarter of 2024, the company reported $12.4 million in revenue. That represented a 102% increase compared to the previous year. For the full year 2024, IonQ expected revenue between $38.5 million and $42.5 million.
However, IonQ continues to operate at a loss, with recent results showing a net loss of $0.24 per share. The company heavily invests in advancing its quantum computing technology, aiming for long-term profitability as the market develops.
On Friday, IonQ’s CEO laid out a “Timeline to Quantum Value.”
The CEO commented that “We anticipate that 2024 results will be at the high end of our bookings and revenue guidance and are extremely excited about 2025.” He also added “We believe that IonQ will be profitable, with sales approaching $1 billion, by 2030.”
For comparison, Amazon.com traded as a public company for approximately 7 years before achieving profitability. Shares of Amazon posted returns of more than 7,800% before that profitability came into effect.
The next few weeks may be bumpy for quantum computing stocks, but one things will tell you what the future holds… their price action.
Investors are always looking for opportunities to buy into corrections on discovery phase companies. The current correction in this group of stocks will be met with tests that will determine the next 4-6 months price direction.
IonQ shares are trading 7% higher after losing 38% of their value on Wednesday.
As with any Discovery Stock, investors are looking to the price and the potential of the stock, not the fundamentals.
As it stands now, IonQ has the benefit of round numbered support from the $30 price. Shares recently saw support at $40 on their ascent and then resistance at $50, displaying the effect of round-numbered prices.
Expect to see that support tested as some investors will take the opportunity to sell stock into the strength after this week’s shock.
A hold of that $30 with an advance to $40 will spark another round of speculation on the stock to drive prices higher. Expect that there will be a “Fear of Missing Out” aspect to that rally as well which will drive prices even faster.
IonQ is set to announce their current quarter’s earnings on March 26. Any positive outlook from that report will send the stock even higher as investors shrug off recent comments from CEO’s and return to speculation on this company’s potentially bright future.
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