IONQ - additional information

Investment Analysis Clubs Saul’s Investing Discussions
1

I recently introduced IONQ to the board. If you haven’t read my previous post, let me describe this business. IONQ is a very small company engaged in the design and manufacture of quantum computers. I previously stated that they are essentially without competition. I need to qualify that statement as there are several companies that are in the field, most notably IBM. Saul noted that this is a risky company when it comes to investing. He based this observation on the six quarters of revenues I posted.

While IONQ is likely a high risk investment, I want to dispel any thoughts that it is a “story stock.” This is not another Westport. For those not familiar with Westport, it is the company recommended by TMF which brought Saul notoriety. Saul posted his financial analysis of Westport on the TMF boards. Saul clearly demonstrated that if this company would never achieve profitability if they continued doing business in the same manner as they had previously. If I recall correctly, that was about 10 years ago when WPRT was trading for $200 or more. Today the stock is ~$7.50 and I believe the company is still losing money. But I digress.

Raw compute power of a quantum computer is measured in a unit called “quants.” However, the mere number of quants that a machine delivers is somewhat meaningless as the fidelity of the output product generally declines as the number of quants increases.

The Quantum Economic Development Consortium is an independent organization that has defined the algorithmic quant (AQ), as a unit of measure for quantum computers that does a much better job of capturing the real world usefulness of such a machine with respect to practical applications. The increase in computational ability of 1 AQ represents a doubling of computing power.

Should you desire to get into the weeds on this, let me suggest the article found here: Algorithmic Qubits: A Better Single-Number Metric.

As I was saying, IONQ is not a story stock. In October of 2021 IONQ made Aria, with a rating of 20 AQ, available via Azure and GCP. Shortly thereafter they added AWS to the list. IONQ has made a second Aria available in order insure 24x7x365 access.

Just last month IONQ announced the general availability of Forte, their most powerful machine yet with a rating of 29 AQ. Forte is the most powerful quantum computer available from any vendor.

IONQ has a goal of achieving 35 AQ this year. During the most recent conference call an analyst asked the CEO about his confidence in achieving the goal. The CEO responded with high confidence that they will meet that goal in the coming year. He also asserted that they will achieve 64 AQ by the end of 2025. A 64 AQ machine may be used to solve problems related to climate, chemistry and other subject areas of such complexity that they can’t be solved today on any platform. And of course, ML/AI will see a great deal of application with such a platform.

But financial performance is just as important as the technical accomplishments. During the most recent conference call the CFO asserted, “Turning now to our balance sheet, cash, cash equivalents and investments as of March 31 2023, were $525.5 million. We continue to believe that this cash position, which we believe is the strongest of any quantum pure player, gives us sufficient cash reserves to get to profitability without needing to raise additional funds, given our current roadmap.”

In addition, the CFO responded to question about the sale of a system with this, “We should also clarify that we did not actually specify that there would be a system sale in this calendar year, only that we expected one to happen in the next 12 to 24 months.” That clarification was made in response to a question about an assertion made during the 4Q22 conference call.

The highest quarterly revenue that IONQ has achieved to date was $4.29M as of 1Q23, reported on May 11. A full system sale represents revenue of “tens of millions of dollars.” In other words, this will be explosive growth if indeed the deliver in the next 12 to 24 months.

But, irrespective of whether or not this sale is made in that time period or a bit later, I think it’s clear that IONQ is real company with real products and a roadmap to profitability.

17 Likes
2

I get the sense that the field is still in VERY early stages including IONQ

For starters, human bias seems to currently be a significant barrier to accurately assessing the results of quantum-computer experiments:

So are quantum computers ready for prime time? Researchers say that they’re not, and that the timeline for development is fuzzy. It all depends on how you define quantum computers and the kinds of problems you expect them to handle.

“There’s always a subtlety in generating these estimates, because no one has experimentally demonstrated a working logical qubit, be it IonQ or Microsoft or any of the experimental platforms,” said Rahul Trivedi, a University of Washington engineering professor who specializes in quantum systems.

Ironically, or appropriately, quantum noise plays a big part in the uncertainty. “A lot of these estimates are made based on noise models,” Trivedi said. “People believe that they work, and they describe their experiment quite well. But then you scale up your experiments, and you start figuring out deficiencies in your noise models, and then you update them, and all of these numbers keep on changing very rapidly. ’

And: There are three quite-different approaches to quantum computing:

Big tech companies such as Microsoft, Google, IBM and Intel are trying to harness superconducting circuits to create their qubits, while other companies including IonQ and Quantinuum are making use of trapped ions instead. D-Wave is going with a different approach called quantum annealing, which applies quantum methods to special types of problems

So of the three methods

  • Superconducting circuits
  • Trapped Ions
  • Quantum annealing

Good, bad or indifferent, I find it interesting that $IONQ is going a different route vs. the big-tech players.

And this is a "Wait, What?: moment: there are two different kinds of qbits

  • Physical qbits
  • Logical qbits

…turns out

  • The number of Physical qbits is a almost-meaningless metric
  • NOBODY has yet demonstrated the existence of a SINGLE logical qbit! lol well ok then

The number of qubits contained in a processor is often used as a metric for progress in the quantum quest. Last November, for example, IBM announced that it created a 433-qubit processor called Osprey, with the goal of surpassing 4,000 qubits by 2025.

But researchers draw a distinction between physical qubits, the raw material for quantum computations, and logical qubits — that is, the reliable building blocks for such computations. Because quantum systems are inherently noisy and subject to errors, building one logical qubit for a fault-tolerant quantum computer could require combining as many as 1,000 physical qubits.

Microsoft’s team estimates that a quantum computer will require a million physical qubits to correct errors and achieve an advantage in solving problems worth solving. This is why Microsoft is focusing on superconducting nanowires for its qubits.

“We’re talking about a million physical qubits as the starting point. A million,” Krysta Svore, vice president for advanced quantum development at Microsoft, said at last week’s Northwest Quantum Nexus Summit.

So for me, so far:

  • “Point taken” that $IONQ is a real company generating revenue.
  • Long way to go before we know who the winners will be
28 Likes
3

@intjudo Thanks for reading and providing interesting input. First, thanks for confirming that the count of quants does not translate to practical compute capability. This is precisely why IONQ measures the compute power of their machines in algorithmic quants (AQ). As I mentioned, IONQ didn’t invent this unit. I provided a link to a technical article explaining what an AQ is. I read it, but it delves into pretty advanced mathematics. I don’t fully understand it, but at a high level my takeaway is that it measures the practical utility of a quantum computer as applied to solving real world problems.

Yes, IONQ has taken the trapped ion route. If it interests you, you can browse the IONQ site to find their explanation as to why this is a better choice than superconductors. As you noted, trapped ions is a different route than that taken by the heavyweights (IBM, Microsoft, Google, others). Again, it’s over my head, but IONQ provides an explanation that isn’t overly laden with physics and math, it can be found here: IonQ | Our Trapped Ion Technology. It boils down to IONQ’s emphasis on delivering practical compute power with the ability to solve real world problems. It is their contention that the other approaches generate excessive noise which impairs the fidelity of the output.

But I guess I would have to concede that the industry is in its infancy. There may be one than one “winner.” But, my money is on IONQ primarily because this isn’t a lab project for them as it is with all the other companies of which I am aware. If you’re a Google or Microsoft, terminating the quantum computer project is easy. You look at the ROI and hockey stick and decide the dollars are better spent on a different project. If you are IONQ there is no other project.

8 Likes
4

@brittlerock

But, my money is on IONQ primarily because this isn’t a lab project for them

If they end up beating out literally ALL of Big Tech with their much-less-expensive approach then ROI ought to be pretty good :slight_smile:

I don’t think it’s likely though (…presumably the massive arsenal of PHDs Big Tech is throwing at the problem has considered/discarded the trapped-ion approach).

Also, I think it’s most likely that Big Tech is dead serious about this, but i feel like I’m veering into territory that’s off-topic for this board.

Given that there apparently is no consensus that $IONQ even has a “quantum computer” I’d be wary of what I’'m interpreting as…possibly-less-than-completely-substantiated claims $IONQ is making…not that I know much about any of this; I don’t, but I do find it interesting.

That said, I’m in! $10 worth let’s see where this goes.

5 Likes
5

$10 will buy about 0.75 shares. Yeah, it’s risky and I’ve kept my investment in line with my level of risk tolerance, but I’m in it for a bit more than that. But, you’re right, this discussion is not appropriate for Saul’s board. I won’t post any more on this unless I have something of value with respect to investing.

As for why IONQ decided to go with trapped ion tech rather than superconductors is well explained on their site. They aren’t particularly interested in maximizing quants. Apparently, it’s easier to increase the quant count with the superconducting tech. Their focus is on providing AQ which measures the performance of a quantum computer with respect to real world, practical applications. They too have a cadre of highly credentialed scientists. Average pay at IONQ is $170K/year before SBC.

I’ve not come across the accusation that they don’t have a quantum computer at all - so somebody is asserting that they’re building conventional computers and just calling them quantum computers? That’s pretty wild. Do you suppose New Enterprise Associates, GV, AWS, NEA, Samsung and Mubadala (I admit, I don’t know what some of those groups are, I assume VCs or similar) all of whom have provided funding have all been hoodwinked. Maybe take a look at this, which I just now noticed on the IONQ blog: https://ionq.com/posts/may-12-2022-ionq-founders-respond

1 Like
6

Does $IONQ even have a quantum computer?

Like the article I quoted says: “It all depends on how you define quantum computers and the kinds of problems you expect them to handle.”

In the context of an Investing board, as an Investor, here is how I define “quantum computer”:

  • A computer
  • …that is not a “classical”/CPU/GPU computer
  • …that can solve problems of Commercial interest
  • …that CANNOT be solved by “classical”/CPU/GPU computers

Let’s see how $IONQ measures up, using the IONQ Founders’ own words:

We believe IonQ has a well-defined path to scale its hardware and tackle problems of commercial value, which it expects will happen in a few years, not in a decade or two.

Translation: by my definition, using what I consider to be a reasonable Investment criteria (“moat”), IONQ does not have a quantum computer. They claim they’ll have one “in a few years.” Which seems like a tall order considering Google Microsoft et al think it will take them a decade or more.

I highly recommend a Google search on “useful quantum computer” (include double quotes) then drop-down the “Any Time” menu and limit search results to one year. I think that demonstrates that nobody in the industry is really making the claim that ANY commercially “useful” quantum computer exists anywhere.

Here are examples of what the quantum computing tech alphas on stackexchange have to say

" If you are wondering what applications IonQ has in mind for the year 2023, the answer is most certainly zero. I wish I could also underline “most certainly zero” to put more emphasis on it. Let me say it again: quantum computing will not be outperforming classical computers for any machine learning applications in 2023. "

" How are quantum computers being used in drug design? They are not. Because useful quantum computers do not exist yet. Ask again in a couple decades :slight_smile:"

" The paper is saying that we can’t currently do the fault-tolerant (error-corrected) quantum chemistry calculation on a quantum computer, even for a situation involving just 1 qubit."

3 Likes
7

This thread has become a a somewhat argumentative conversation between you and me. That’s not what this board is for and I will not extend it beyond this reply.

In my original post regarding IONQ I stated, “In simple terms, investing in this company is pretty speculative.” I haven’t changed my opinion. I still think it’s worth a small position, you obviously don’t. There’s no more to it than that. I’m not trying to convince you to buy IONQ stock. If it’s too risky for you, don’t buy it.

8 Likes
8

The conversation had its flaws (…my apologies) but I’m glad we had it. I learned some things I otherwise might not have, about an important/emerging industry and maybe some others did too.

8 Likes
9

I was not going to add anything to this thread, but I think something pertinent to an investment thesis is not off topic for this board.

In reviewing some of the news releases from IONQ I came across this:

"IonQ continues to demonstrate strong business momentum, and our ability to double bookings year-over-year in FY23 will be yet another important milestone,” said Thomas Kramer, Chief Financial Officer of IonQ. “We are thrilled to further our progress towards commercialization through our continued expansion in Europe.”

“[IonQ] is increasing its 2023 bookings expectations by twenty five percent (25%) to a range of $45 million to $55 million. At the midpoint, IonQ is now expecting more than 100% growth in bookings.”

Admittedly, bookings are not revenue, in fact elsewhere in the news release the CFO specifically states that they are not raising their 2023 revenue guidance ($18.8M - $19.2M). Nevertheless, 100% YoY increase in bookings is notable and strengthens my conviction that IonQ resides on the positive side of that fuzzy line that separates speculation from investment. You most likely have a different assessment.

BTW - about the assertion that IonQ does not and will not have a quantum computer for a few years, I suggest you peruse the blog posted on their website. If one were to amend the “few years” to address a quantum computer that can outperform the the most powerful supercomputers available, I would then agree with the statement. But the assertion that “nobody in the industry is really making the claim that ANY commercially “useful” quantum computer exists anywhere.” is simply not true. That is not the same as “quantum computing will not be outperforming classical computers for any machine learning applications in 2023” with which I agree.

5 Likes
10

As far as I can determine IONQ computers are being used by Developers to validate code they are writing. And that’s about the limit of their current usefulness.

I’d have to do a lot more investigating to confirm, but based on some chatter on SeekingAlpha I think this is the state of quantum computing code:

  • Computer code for quantum computers is materially different vs. computer code for classical computers
  • Even though “real” (…my term, sorry but I’m sticking with it) quantum computers are not yet available, relevant people believe they know already how to program them and already have robust coding frameworks they are using to write code for quantum applications
  • A LOT of code has already been developed for quantum applications. So as soon as “real” quantum computers are available, people have code they can immediately use
  • Quantum coders need to be able to test their quantum code. There are two was to do this 1) Use simulation software deployed on classical computers 2) Use existing not-really-quantum computers. Both are imperfect mechanisms for doing their testing.

The short story is I think the commercial usefullness of IONQ’s currently available computers is limited to testing quantum code in preparation for the availability of “real” quantum computers.

I found this interesting: ppl are already optimizing their access to IONQ’s computers: they do as much testing as possible on classical computers using simulation software, so that they only have run a few tests on IONQ’s computers.

Please consider all of the above to be anecdotal, and (at best) under-informed. This is just me reading stuff on the Internet and I’m totally new to this quantum stuff.

I think IONQ is compelling and that’s where we can agree.

However I don’t think we have sufficient numbers to substantiate IONQ as a stock appropriate for this board.

This is the last I’ll say on this thread. Thanks for the conversation!

11 Likes