Should You Forget IonQ and Buy 2 Artificial Intelligence (AI) Stocks Right Now?

The article advises institutional investors to prioritize established artificial intelligence leaders like Taiwan Semiconductor Manufacturing (TSMC) and Broadcom over speculative quantum computing plays such as IonQ. TSMC, which commands 90% of the advanced processor market, reported a 30% revenue increase to $33.1 billion and 39% earnings growth in Q3, with its CEO expressing confidence in AI demand. Broadcom secured a significant deal with OpenAI for AI accelerator co-development and projects a 650% surge in AI revenue to $90 billion annually by 2027. In contrast, IonQ, despite its advanced quantum technology, posted a $178 million net loss on $21 million in sales, with its real-world applications still years away, making it a higher-risk investment compared to the immediate growth and market dominance of the AI sector.

Analysis

The current investment landscape favors established artificial intelligence leaders over nascent quantum computing ventures, despite the latter's long-term potential. IonQ, a quantum computing pioneer, reported only $21 million in recent quarterly sales against a $178 million net loss, underscoring the speculative nature and distant real-world applications of the technology. This contrasts sharply with the immediate, robust growth observed in the AI sector, positioning quantum computing as a higher-risk, longer-horizon bet.

Taiwan Semiconductor (TSM) demonstrates significant market leadership, controlling approximately 90% of the advanced processor market crucial for AI infrastructure. The company's Q3 results showcased strong performance, with revenue increasing 30% to $33.1 billion and earnings per American depositary receipt (ADR) rising 39%. Furthermore, TSM's P/E ratio of 31.5 remains competitive, aligning closely with the S&P 500 average and significantly below the broader tech sector's 47.

Broadcom (AVGO) is poised for substantial growth within the AI ecosystem, driven by its recent strategic partnership with OpenAI. This collaboration involves co-developing AI accelerators and deploying 10 gigawatts of AI server racks by 2029. Management projects an impressive 650% surge in AI revenue to $90 billion annually by 2027, solidifying its position as a key enabler of advanced AI computing.

Key Decisions for Investors

• Prioritize investments in established AI infrastructure providers like Taiwan Semiconductor and Broadcom, given their proven market dominance and strong financial performance.
• Exercise caution with highly speculative quantum computing plays such as IonQ, acknowledging their significant current losses and the long-term, unproven nature of their commercial applications.
• Monitor the continued growth in AI demand and the execution of strategic partnerships, as these are critical drivers for companies like Broadcom and Taiwan Semiconductor.