Comparing IonQ and Alphabet: The Leading Quantum Computing Stocks

The quantum computing industry is currently experiencing a significant transition from research labs to practical commercial applications. Although achieving a clear quantum advantage, where quantum computers can perform tasks far better than classical computers, remains an ongoing challenge, the quest for this breakthrough is creating exciting investment opportunities. The Quantum Insider forecasts that quantum computing could be worth $1 trillion by 2035, potentially transforming sectors like finance, defense, life sciences, and manufacturing.

In this rapidly evolving field, IonQ and Alphabet are two prominent companies adopting different technological strategies to advance quantum computing. Understanding their distinct approaches and market positions is crucial for investors aiming to leverage this technological innovation.

The case for IonQ

IonQ's position in the quantum computing landscape is strengthened by three key advantages. First, its trapped-ion technology is gaining traction in the commercial realm, especially within government and defense sectors.

This momentum is highlighted by recent contracts with the U.S. Air Force Research Lab, including a $54.5 million quantum computing agreement and a $21.1 million quantum networking project through Qubitekk. Further validation of IonQ's technologies comes from a newly formed strategic partnership with General Dynamics.

Secondly, IonQ's cloud-based quantum services expand its market reach through major platforms such as Amazon, Microsoft, and Google. This model of quantum-computing-as-a-service (QCaaS) enables customers to explore quantum applications without incurring significant upfront costs.

Nonetheless, it is essential to note that IonQ is currently operating at a loss, prioritizing technological development over immediate profits. In November, the company reported a net loss of $129.6 million for the first nine months of 2024, contributing to an accumulated deficit of $481.7 million. While these financial figures are concerning, they reflect crucial investments focused on improving qubit counts and achieving significant milestones necessary for a broader quantum advantage.

The case for Alphabet

On the other hand, Alphabet leverages its deep technical knowledge and substantial resources to pursue quantum computing. Its latest innovation, the Willow quantum processor, has shown impressive advancements, particularly in error correction that scales with increasing qubits, an important milestone referred to as "below threshold" in the industry.

This breakthrough is remarkable because Willow has completed calculations in under five minutes that would take the most advanced supercomputers billions of years to finish. While these achievements are not yet applied commercially, they bolster Alphabet's credibility in quantum architecture and error correction. Moreover, Alphabet's advanced fabrication facility in Santa Barbara provides it with comprehensive control over the complex manufacturing processes involved in quantum technology.

However, it's worth mentioning that Alphabet's quantum computing division is only a small part of its diverse business portfolio. The company continues to see substantial revenue growth from its strong AI and cloud services, leading to an impressive operating margin of 32% in the most recent quarter. Thus, while Alphabet's quantum research may enhance its other businesses in the long run, it should be seen more as a project focused on future innovations rather than a near-term revenue setup.

Which stock is the better quantum computing play?

For investors specifically looking for exposure to quantum computing, IonQ may present a more straightforward opportunity despite its current financial losses. The company’s expanding government contracts and partnerships signal a growing validation of its trapped-ion technology. Additionally, its QCaaS model opens up various revenue possibilities as the quantum market progresses.

Conversely, Alphabet offers a more balanced investment perspective. While its quantum breakthroughs are noteworthy, particularly in the domain of error correction, they represent only one facet of a broad array of tech initiatives within the company.

Investors interested in quantum computing could benefit from a stake in Alphabet, given its established revenue sources, including advertising, cloud services, and AI developments. However, those explicitly seeking pure-play quantum technology stocks might find focused opportunities in alternatives like IonQ more appealing.

quantum, IonQ, Alphabet