It looks like the wrong time to consider purchasing IonQ Inc. (NYSE:IONQ) stock. IonQ is a company that has come public via a special purpose acquisition company (SPAC) and is a name of note in the fledgling quantum computing industry and market.
IonQ has proven very volatile since its Oct. 1 inception. The first pure-play quantum computing start up dropped immediately after going public, then shot up from $7 to $31, and entered a prolonged skid from November. It only retraced some of those losses beginning in February.
That’s why it’s best to leave IonQ alone. There is little to suggest that IonQ should show strength in the current economic environment.
The press release following IonQ’s SPAC closing provides a bit of insight in to the firm’s business: “IonQ, Inc. is a leader in quantum computing, with a proven track record of innovation and deployment. IonQ’s next-generation quantum computer is the world’s most powerful trapped-ion quantum computer, and IonQ has defined what it believes is the best path forward to scale. IonQ is the only company with its quantum systems available through the cloud on Amazon Braket, Microsoft Azure, and Google Cloud, as well as through direct API access.”
That sounds interesting and promising, but it warrants further explanation.
Like me, you might have little conception of quantum computing. Quantum computing promises to leverage the field of quantum mechanics to increase computing power. IBM’s (NYSE:IBM) website notes that Quantum computing has been leveraged in quantum battery tech for EVs and in the search for the Higgs Boson particle.
A study and subsequent publication by the Quantum Economic Development Consortium (QED-C), a third-party industry group, validated IonQ in asserting its “belief that its computers are best-in-class along key dimensions, such as in their accuracy while running algorithms with high circuit width and high circuit depth. IonQ’s computer outpaced entries from IBM, Honeywell and Rigetti.”
This is a highly technical field with a low number of competitors but early indications are that IonQ has a chance to lead. It is interesting because of that. But at the same time, investors have to divorce all of this potential from the current realities of the market.
Tech stocks have had a weak start to 2022. That bodes poorly for IONQ stock. Inflation reports are largely to blame. The market dropped when December inflation figures were released in early January. Those 7% inflation figures were the worst in 40 years. January’s subsequent 7.5% figures sent the market reeling again.
The Fed will be raising interest rates throughout 2022 to curb that inflation. That means easy capital will dry up. And that means tech stocks will continue to suffer as capital will migrate to safer assets with proven fundamentals.
IonQ is a well-funded firm in a leading edge technology that may or may not materialize into an attractive market. The company reported $587 million of cash and cash equivalents in its last earnings report. That represents the proceeds from the SPAC.
It can continue to develop its tech and carve out a business for itself. That’s certain. But no one knows whether there’s anything there. IonQ recorded a miniscule $223k of revenue in Q3 along with a net loss of $14.8 million.
What to Do With IONQ Stock
I believe IonQ will remain very volatile. It has potential as evidenced by its early movement in the nascent quantum computing niche. But it has the economic reality of sky-high inflation keeping it tethered to earth.
It shouldn’t escape that gravity for quite some time to come. The truth is no one knows if anything meaningful will come out of quantum computing. There’s a chance that it may never have commercial applicability that results in significant revenue streams.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.