Since ChatGPT took the world by storm in the fall of 2022, artificial intelligence (AI) has increasingly entered many aspects of society. For example, US regulations around AI will increase by 56% by 2023.
Now companies are advancing computer science to facilitate the evolution of AI. Two prominent companies in this field are the quantum computer company IonQ (NYSE: IONQ) and semiconductor giant Nvidia (NASDAQ: NVDA).
Each company has developed breakthrough technologies poised to revolutionize the computer industry, propelling their stocks higher. Through December 11, IonQ’s stock price was up about 140%, and Nvidia’s was up about 180% through 2024.
But which company offers a better long-term investment to capitalize on the age-old trend of AI? I’ll dive into both companies to answer that question.
A look at IonQ’s quantum technology
IonQ is an attractive investment because quantum computing can advance AI beyond what is possible with the world’s most powerful supercomputers. Quantum computers use subatomic particles to perform complex calculations in seconds, which can take years for a traditional computer to complete.
IonQ isn’t the only company dabbling in quantum computing, but the technology is overcoming the challenges the industry faces. For example, many quantum systems require temperatures colder than those in space to keep subatomic particles stable, but IonQ’s platform can operate at room temperature.
The technology has allowed it to attract customers like Oak Ridge National Laboratory, which is using IonQ quantum computers to modernize the U.S. power grid. The growing customer base has led to rapid revenue growth for the company.
In the third quarter, IonQ’s revenue rose 102% year over year to $12.4 million. The company also brought in $63.5 million in new customer bookings in the quarter.
However, IonQ is not profitable. It exited the third quarter with a net loss of $52.5 million, compared with $44.8 million last year, as it spent $33.2 million on research and development. It’s not cheap to build innovative technology.
IonQ continuously strengthens its technological advantages. In November, it announced that it was acquiring quantum networking company Qubitekk. Today’s AI depends on the power of many computers connected together in a network. With the acquisition of Qubitekk, IonQ wants to mimic the network effect for its quantum machines.
Nvidia’s strengths in AI
The rise of AI has boosted Nvidia’s business as companies and governments showed an insatiable appetite for its semiconductor chips. For example, some estimates suggest that ChatGPT was built using 10,000 Nvidia chips.
The company’s products are popular for AI because Nvidia has developed specialized chips called graphics processing units (GPUs). These provide AI systems with the computer processing power to quickly and efficiently sift through mountains of data to perform tasks.
Demand for Nvidia’s products remains high. The company achieved record revenue of $35.1 billion in its fiscal third quarter ended October 27. This represents an increase of 94% compared to the previous year. Net income in the third quarter also rose to $19.3 billion, a notable increase of 109% year over year.
But the latest technology could propel the company to greater heights. The Blackwell platform is specifically designed for the advanced computing power that AI systems require. Nvidia claims it is pushing the boundaries of scientific computing as each Blackwell GPU features more than 200 billion transistors.
Customers are so hungry for Blackwell that Nvidia management stated that “demand far exceeds supply.” The governments of Japan and Taiwan are among the organizations building AI supercomputers using Blackwell.
With so much demand for products, Nvidia expects fourth-quarter revenue to be about $37.5 billion. That’s a double-digit increase from last year’s $22.1 billion.
Choose between IonQ and Nvidia
Both companies offer good reasons to invest in them given their compelling technologies. To choose between the pair, here are other important factors to consider.
Nvidia’s Blackwell platform is so powerful that it can simulate the capabilities of quantum computers. Blackwell can do this because current quantum machines are limited in how long they can perform calculations before the subatomic particles break down. As a result, quantum computers cannot replace classical computers, such as Blackwell, in the short term.
In the long term, however, quantum computers are expected to achieve a quantum advantage, a term that means a time when a classical computer can no longer keep up with a quantum machine. Some estimates predict the quantum advantage will emerge some time after 2030. So it could be years before IonQ’s technology catches up with Nvidia’s, making IonQ a more speculative investment.
Plus, with every company’s stock up this year, valuation is another consideration. Here’s a look at their price-to-sales (P/S) ratios. The metric indicates the price investors are willing to pay for each dollar of a company’s sales.
Data per YCharts.
As the chart shows, IonQ’s P/S value has soared in recent weeks and is now incredibly high compared to Nvidia’s. This suggests that Nvidia stock is a better value.
The better investment choice becomes clear when you consider three things:
-
IonQ shares appear overvalued.
-
Nvidia’s profitability and demand for its Blackwell platform are soaring.
-
IonQ’s technology is still years away from widespread adoption.
Between these two forward-thinking companies, Nvidia stands out as the winning investment in the exciting field of artificial intelligence.
Should You Invest $1,000 in Nvidia Now?
Consider the following before buying shares in Nvidia:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $822,755!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns December 9, 2024
Robert Izquierdo has positions at IonQ and Nvidia. The Motley Fool holds positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
