Comparing IonQ and Nvidia: Which Artificial Intelligence Stock is Better?

Since the sudden rise of ChatGPT in the fall of 2022, artificial intelligence (AI) has become a significant part of various sectors in society. Notably, regulations regarding AI in the United States saw a remarkable increase of 56% in 2023.

As the advancement of computer science continues, two key players in the AI landscape are the quantum computing firm IonQ and the semiconductor leader Nvidia.

Both companies have developed innovative technologies that could reshape the computing world, contributing to impressive growth in their stock prices. By December 11, IonQ saw its share price increase by approximately 140%, while Nvidia experienced a rise of around 180% in 2024.

This raises an important question: which of these companies is a better choice for long-term investment to benefit from the growing field of AI? Let's take a closer look at both to find out.

Examining IonQ's Quantum Technology

IonQ is seen as an appealing investment due to its focus on quantum computing which promises to enhance AI capabilities beyond the limits of the most powerful traditional supercomputers. Quantum computers have the ability to perform complex calculations using subatomic particles, achieving results in mere seconds that would take classical computers years.

While several companies are delving into quantum computing, IonQ stands out due to its innovative technology that addresses common industry challenges. Many quantum computing systems need extremely low temperatures to maintain particle stability; however, IonQ’s systems function effectively at room temperature.

IonQ has secured contracts with notable clients, such as Oak Ridge National Laboratory, which is utilizing IonQ's technology to improve the U.S. power grid. This expanding clientele has significantly boosted IonQ's revenue.

In the third quarter of its fiscal year, IonQ reported a 102% year-over-year increase in sales, bringing in $12.4 million. The company also secured $63.5 million in new customer bookings during the same quarter.

Despite these successes, IonQ still operates at a loss. By the end of Q3, the company reported a net loss of $52.5 million, up from $44.8 million a year earlier. This increase was largely due to substantial spending on research and development, totaling $33.2 million.

IonQ is actively enhancing its technological edge. Recently, the company announced its plan to acquire Qubitekk, a quantum networking firm. In today's world, AI heavily relies on interconnected networks of computers. This acquisition aims to leverage the network effect to benefit IonQ's quantum machines.

Nvidia's Expertise in AI Technology

Nvidia has greatly benefitted from the AI surge, as businesses and governments are eager to procure its semiconductor chips. For context, it's estimated that around 10,000 Nvidia chips supported the development of ChatGPT.

Nvidia's appeal in AI stems largely from its creation of specialized chips known as graphics processing units (GPUs), which endow AI systems with the necessary processing power to rapidly analyze vast amounts of data for task execution.

The demand for Nvidia’s products remains robust. In its fiscal Q3, which ended on October 27, the company reported record revenues of $35.1 billion, a staggering increase of 94% compared to the prior year. Furthermore, the company’s net income soared to $19.3 billion, reflecting a remarkable 109% year-over-year growth.

Looking forward, Nvidia’s latest innovation, the Blackwell platform, is tailored specifically for the advanced computing requirements of AI systems. Nvidia asserts that the Blackwell platform enhances scientific computing capabilities, as each GPU comprises over 200 billion transistors.

Customer demand for Blackwell is so intense that Nvidia's management has stated, "demand greatly exceeds supply." Additionally, key global players, including the governments of Japan and Taiwan, are constructing AI supercomputers using Blackwell technology.

Given the high product demand, Nvidia anticipates Q4 revenues will reach approximately $37.5 billion, marking a significant rise from the previous year’s revenue of $22.1 billion.

Deciding Between IonQ and Nvidia

Both companies present compelling reasons for potential investment, highlighting their impactful technologies. However, some additional considerations can help in making a decision.

Nvidia's Blackwell platform features capabilities that can replicate the performance of quantum computers. This is because current quantum machines are limited in their calculation duration due to the instability of subatomic particles. Thus, it remains unlikely that quantum computers will completely replace classical systems like Blackwell in the near future.

In the long term, however, quantum computers are anticipated to reach a stage known as quantum advantage. This term refers to a future point when classical computers can no longer match the performance of quantum machines. Some forecasts suggest that we may witness quantum advantage sometime after 2030, implying that IonQ’s technology may take years to become mainstream.

Moreover, with both companies seeing stock price increases this year, valuation is another key factor to consider. For example, comparing their price-to-sales ratios reveals that IonQ's valuation has skyrocketed recently, making it appear quite high in comparison to Nvidia’s shares, which seem to represent better value.

When evaluating the investment potential of these two innovative companies, three key points emerge:

• IonQ’s stock appears overvalued.
• Nvidia is experiencing significant profitability and growing demand for its Blackwell platform.
• IonQ’s technology may be years away from mainstream adoption.

Ultimately, between these two leading firms, Nvidia clearly emerges as the more promising investment in the exciting realm of artificial intelligence.

AI, Stocks, Investment