IonQ: I believe this thing is real.

Quantum computing sounds like science fiction, but it is in fact real and likely ready for commercialization. This controversial company seems to be a technological and commercial frontrunner.

IONQ 0.00%↑ is a controversial quantum computing company that went public via SPAC two years ago. On September 19, 2023, they held their inaugural Analyst Day. I found that event impressive in terms of style and the actual content presented (to the extent I was able to follow). They went into great detail about the science, but they also thoroughly explained their commercialization and scaling strategy.

In this article, I will articulate the IonQ bull case and I will address the key concerns of the bear case that were summarized well in Scorpion Capital’s short seller report last year.

There is a small but sophisticated IonQ community on Twitter that I found helpful to follow to understand this company. If you are interested into IonQ or this nascent industry in general, I suggest you check out BillyQuantumAI, JKeynes, Quantum Analyst and Shawn Kwon.

---

Table of Contents

• Investment Thesis Summary

• Market Opportunity

• Company History

• Science

• Track record

• Technology Choice

• Leadership

• Short Seller Report

---

Investment Thesis Summary

• Quantum Computing promises to perform calculations by manipulating atoms that exist in more than one state at the same time and that communicate with each other magically over large distances. To the uninformed ear, this sounds like science fiction. But it’s actually already here and much more investable than other fantastical ideas like nuclear fusion or space mining for example.

• According to BCG, the technology is close to an inflection point and enterprise-grade quantum computing will generate tangible business value as soon 2025. They project that this might become a $2-3 trillion industry by 2035 in terms of direct and indirect benefits for vendors and customers. In such a scenario, it’s absolutely plausible that its key players will capture trillions of Dollars in market capitalization. For reference, NVIDIA is currently sporting a trillion Dollar valuation because investors are excited they will capture a lion share in the $250bn cloud computing market.

• Quantum computing becomes particularly exciting in conjunction with the rise of Deep Learning, which requires enormous amounts of computing power. That’s the cutting edge where quantum computing has the potential to shine. Compared to classical computing, its performance scales much better with problem size. The most potent way to play AI might very well be via exposure to quantum computing.

• IonQ appears to be the leader of a small group of investable quantum computing pure plays. They have a compelling technology strategy and have been executing well against their mission recently. For example, their latest products have been released several months ahead of the roadmap outlined in 2021 and they have started constructing their dedicated manufacturing facility in Seattle. This creates optimism that this technology is not just a science project, but in fact ready for commercialization.

• With a YTD performance of +280%, the stock has left the other publicly traded quantum computing peers behind. It’s now even up against its IPO. The divergence among the listed quantum computing pure plays suggests that this sector is trading on fundamentals, not deluded exuberance.

• IonQ’s founders have assembled a credible and experienced leadership team with Big Tech background. These are people who have witnessed previous innovation cycles in cloud computing and mobile computing first hand. And they are betting their careers that quantum computing is real as the next big thing.

• Last year, Scorpion Capital, a reputable short seller with a great record, published a detailed and vicious investigative report on the company. They argued that the technology does not exist and likely never will, that the founders and leading scientists are not fully committed to the venture, that the CEO is not trustworthy and that the company’s revenue is not real because it’s mostly generated with affiliates.
  Some of these allegations have merit, but I believe these are sideshows to what actually matters. Going forward, the crucial pillar of the IonQ investment case is about scaling the existing research into commercially viable solutions. That needs engineering which does not require two professors on the floor for 60 hours a week. The CEO made a decent impression on me during the analyst day. And the related party transactions are insignificant for the broader story.