To The Moon

$IONQ Inc.(IONQ)$ This article discusses the recent developments of IonQ, an early-stage quantum computing company that I've been following and investing since 2021. For those of you who have no idea what Quantum Computing (QC) is about or how IonQ is uniquely positioned to grow in this nascent industry, I've also included a summary at the latter part of this article that will hopefully help point you in the right direction to DYODD. 

Ok here goes...

Yesterday (22 June 2023), there were 3 press releases announced.

#1 - IonQ's highest grade QC (29AQ Forte) is now commercially available to customers worldwide.

IonQ offers access to their quantum computers via Quantum-Computing-as-a-Service (QCaaS) on AWS, Azure, Google Cloud as well as their own private cloud. With this announcement, IonQ will have a total of 4 systems available online - one 11AQ Harmony, two 25AQ Aria and one 29AQ Forte. 

While IonQ doesn't release breakdown of QCaaS revenue numbers, it is reasonable to assume that every QC added is an additional revenue stream for IonQ. It'll be interesting to see if there is indeed demand for IonQ's QCs and the corresponding impact on revenue in the upcoming 2H or even Q3 financial reports.

* AQ = Algorithmic Qubit. IonQ's method to measure performance. Higher is better. You can learn more about it from IonQ's website.

#2 - IonQ partners QuantumBasel to establish an EU quantum data center.

IonQ will install 2 future QCs (35AQ and 64AQ) for $28 million USD on-site at infinityBasel campus in Switzerland. This is a big deal in a number of ways. 

First, this is the first "system sales" for IonQ. It means that there is actual interest in buying their systems beyond just online access.

Second, the deal allows IonQ to have a 50% stake in the systems to service their customers in EMEA. This means that IonQ will be able to expand their presence to the EU and Middle East where there are strong interest as well as government fundings that support the development of quantum technologies. 

Third, infinityBasel connects companies to their partners such as IonQ to foster development of innovative technologies and businesses. This will present IonQ with opportunities to reach out to potential customers more easily.

#3 - IonQ revised FY23 booking guidance upwards 25% from $40M to $50M. 

While this amount may not be much (you have to bear in mind that this is an early-stage company), IonQ has been consistently hitting their revenue and technological milestones ahead of schedule based on their pre-SPAC roadmap. This indicates that there is an stronger than anticipated demand for their QC and a validation of their technology. 

So... why invest in IonQ?

To answer that we must first understand why Quantum Computing. You can find lots of articles online that explains better but the short answer here is that...

Quantum Computers are potentially better at solving certain computation problems than present-day supercomputers. 

It is also perceived that Quantum Computers might one day break present-day encryption which would be a major security threat to nations, and companies. 

Reason 1: Strong government support and funding

Because of the above, major governments all over the world such as U.S., EU, Middle East, India and China are setting aside billions of dollars in fundings to advance quantum technologies. Sort of like a quantum technology race. 

For IonQ, they have secured a contract with U.S. Airforce Research Lab and gotten expressed support to building a QC manufacturing facility in Washington. They also have partnerships with government and educational institutions to secure talent as well as supply of important resources (barium ions). Once they go live at QuantumBasel, they will be able to tap into the findings in EU as well. So follow where the money flows.

Reason 2: Mature tech, lower error rates

There are many different ways to build a QC, with each technology at various stages of maturity. The 2 relatively mature technologies are: superconducting and ion traps. Again, please read up online if you are interested else the short answer is...

Superconducting QC can perform calculations  faster but has a higher error rate while ion traps QC tend to slower in calculations but are more stable and lower error rate.

The error rate is particularly crucial because as you scale up the system, the error rates compound, and the results become noise which isn't particularly useful. 

In the superconducting camp, you have IBM, Google, Rigetti, D-Wave and many others. 

On the ion trap side, there are only 3 companies worldwide (IonQ, Quantinuum, AQT) and IonQ is the only pure-QC public company. when it comes to scaling up the system, I see ion trap as having the advantage here.

There are other technologies - cold atom, photonics, quantum dots - explored by other tech companies such as Microsoft and Intel.

Reason 3: Comparitively well-capitalised

When compared to the other publicly-traded companies such as Rigetti and D-Wave, IonQ has a stronger balance sheet. With over $500 million USD in cash and cash equivalents and an approximate cash burn of $25 million USD per quarter, IonQ has a comfortable runway of 3-5 years to reach profitability. If they are able to continue reaching the milestones on their roadmap, they will not need to raise additional capital. 

Reason 4: Great team, great culture

The co-founders, Monroe and Kim, are prominent researchers/inventors in the field with over 25 years of relevant experience. They also have some of the best people who joined from related tech companies. They appear to have a good company culture as evidenced by the low turnover rate (via LinkedIn) and good reviews (via Glassdoor).

Risks

No company is perfect. Of course there are risks. IonQ is an early-stage company so there are still many unknowns. Here are some of favourite ones:

- IonQ may never be able to successfully scale up their ion trap QC,

- IonQ will run out of money before achieving profitability,

- Competing companies build better ion trap QCs,

- New technologies come along that makes ion trap technology redundant,

- No useful quantum algorithm is ever discovered/designed to run on QCs,

- Supercomputers are still better at solving computation problems,

- No useful business use case is discovered that requires a QC.

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OK, that's all for this article.

If you've come this far, thanks for reading!

Let me know your thoughts or comments in the thread.