Since ChatGPT took the world by storm in the fall of 2022, artificial intelligence (AI) has increasingly penetrated many aspects of society. For example, US regulations regarding AI increased by 56% in 2023.
Today, companies are advancing computer science to fuel the evolution of AI. Two prominent companies in this space are quantum computing company IonQ; (NYSE:IONQ) With semiconductor giant Nvidia (NASDAQ:NVDA).
Companies are developing breakthrough technologies that are poised to revolutionize the computing industry, sending stock prices soaring. Through December 11th, IonQ’s stock price was up about 140%, and Nvidia’s stock price was up about 180% in 2024.
But which company offers a better long-term investment to take advantage of long-term trends in AI? To answer that question, we’ll take a closer look at both businesses.
IonQ is an attractive investment because quantum computing can advance AI beyond what is possible with the most powerful supercomputers on the planet. Quantum computers use subatomic particles to perform complex calculations in seconds that would take traditional computers years to complete.
IonQ isn’t the only company working on quantum computers, but its technology is overcoming challenges facing the industry. For example, many quantum systems require temperatures colder than the universe to keep their subatomic particles stable, but IonQ’s platform can operate at room temperature.
Its technology has helped it win customers such as Oak Ridge National Laboratory, which is using IonQ’s quantum computers to modernize the U.S. power grid. The company’s revenue grew rapidly due to an expanding customer base.
IonQ’s revenue for the third quarter was $12.4 million, an increase of 102% year over year. The company also earned $63.5 million in new customer bookings during the quarter.
However, IonQ is not profitable. Net loss ended the quarter at $52.5 million, up from $44.8 million a year ago, as the company spent $33.2 million on research and development. Building innovative technology isn’t cheap.
IonQ continues to strengthen its technological advantages. In November, it announced that it would acquire quantum network company Qubitek. Today’s AI relies on the power of large numbers of networked computers. With the acquisition of Qubitekk, IonQ plans to emulate the network effects of its own quantum machines.
The rise of AI has accelerated Nvidia’s business as companies and governments have demonstrated an insatiable appetite for the company’s semiconductor chips. For example, some estimates say ChatGPT was built using 10,000 Nvidia chips.
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The company’s products are popular in AI because Nvidia has developed a special chip called a graphics processing unit (GPU). They provide AI systems with computational power to quickly and efficiently process large amounts of data to perform tasks.
Demand for Nvidia products remains strong. The company achieved record revenue of $35.1 billion in its fiscal third quarter, which ended Oct. 27. This represents a 94% increase over the previous year. Net income also increased in the third quarter, reaching $19.3 billion, an impressive 109% year-over-year increase.
But its latest technology could propel the company to even greater heights. The company’s Blackwell platform was specifically designed for the advanced computing required for AI systems. Nvidia claims that each Blackwell GPU has over 200 billion transistors, pushing the limits of scientific computing.
Customers are so hungry for Blackwell that NVIDIA executives said “demand significantly exceeds supply.” The governments of Japan and Taiwan are among the organizations using Blackwell to build AI supercomputers.
With so much demand for its products, Nvidia expects fourth-quarter sales to be around $37.5 billion. This is a double-digit increase compared to the previous year’s $22.1 billion.
Both companies have compelling technology, so there are good reasons to invest. There are other important factors to consider when choosing which pair.
Nvidia’s Blackwell platform is so powerful that it can simulate the power of a quantum computer. Blackwell is able to do this because today’s quantum machines have a limited amount of time to perform calculations before subatomic particles break apart. As a result, quantum computers cannot replace classical computers such as Blackwell’s in the short term.
However, in the long term, quantum computers are expected to achieve quantum advantage, a term that refers to the time when classical computers will no longer be able to keep up with quantum machines. Some estimates predict that quantum supremacy will emerge after 2030. As such, it could be years before IonQ’s technology overtakes Nvidia’s, making IonQ a more speculative investment.
Furthermore, as the stock prices of various companies have increased this year, valuations must also be considered. Now let’s look at the price-to-sales ratio (P/S). This metric shows the price investors are willing to pay for each dollar of a company’s sales.
Data by YCharts.
As the graph shows, IonQ’s P/S multiple has skyrocketed in recent weeks and is now incredibly high compared to Nvidia. This suggests that Nvidia stock is highly valued.
Better investment choices will become apparent when you consider these three things.
IonQ stock appears to be overvalued.
Nvidia’s profitability and demand for its Blackwell platform are skyrocketing.
IonQ’s technology is still years away from widespread adoption.
Between these two cutting-edge companies, NVIDIA stands out as the best bet for investing in the exciting field of artificial intelligence.
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Robert Izquierdo has held positions at IonQ and Nvidia. The Motley Fool has a position in and recommends Nvidia. The Motley Fool has a disclosure policy.
“Better Artificial Intelligence Stocks: IonQ vs. Nvidia” was originally published by The Motley Fool.
