Quantum computing company IonQ goes public via SPAC

Today, Maryland-based quantum computing company IonQ is made public through a SPAC in a deal that is expected to raise $ 650 million. Its valuation of $ 2 billion and its large investors indicate that quantum computing could be useful for businesses sooner than expected.

The company’s main product is a 22-qubit quantum computer, to which it sells access through Amazon AWS, Microsoft Azure, and Google Cloud. Qubits are the much more versatile analogs of binary bits used in conventional computers.

IonQ says its material is based on 25 years of research by Chris Monroe and Jungsang Kim, professors at Maryland University and Duke University, respectively. The two licensed their research from universities and founded a company on that basis in 2015, with the stated goal of bringing quantum computing out of the lab and into business.

IonQ founders Jungsang Kim (left) and Chris Monroe. [Photo: IonQ]

Many in the tech industry are hoping that quantum computers will enable the next big advancements in computing power, now that the intrusive incremental gains of traditional silicon chips have become increasingly difficult. As chipmakers try to squeeze more transistors onto silicon for ever smaller increases in capacity, quantum proponents claim that adding a single qubit to a quantum machine can double its power.

But quantum computing is still a nascent technology; most experts don’t expect it to outperform today’s supercomputers for at least five years. So it’s only natural to wonder how IonQ is making money now and why new investors should be confident that the company’s profits will continue to grow after the IPO on Friday.

IonQ CEO Peter Chapman told me that anyone can access IonQ’s 22-qubit quantum computers today. “You can use these devices, they’re relatively cheap, for two dollars you can run your quantum version of Hello World,” he says, referring to a short program that developers use to test new programming languages. IonQ does not disclose its revenue, but has publicly stated that it is “eight figures,” with an execution rate of several tens of millions per year.

IonQ President and CEO Peter Chapman. [Photo: IonQ]

“There is a very high probability that quantum will be an industry worth hundreds of billions of dollars in market capitalization because it is going to fuel the future of the cloud,” said Niccolo de Masi, CEO of PSPC in making IonQ public, in a September 24 interview. “IonQ wouldn’t have Amazon as a shareholder and Google as a shareholder if it weren’t for the trillions of dollars in market capitalization that each of these companies have.”

Most people in the industry believe that quantum computers will need to reach around 1000 qubits to compete with the traditional supercomputer service provided today through the cloud.

IonQ will deliver such a system “in about two years, maybe three,” Chapman tells me. “And it’s a lot sooner than most people think.” Chapman came to IonQ from Amazon, where he led the engineering group behind Amazon Prime.

IonQ plans to release a new chip in 2023 containing 64 qubits. The company thinks it can upgrade that same chip design to hold “two or three hundred” qubits. And that system will be modular, says Chapman; the quantum chips will be contained in rackmount boxes with optical connections so that it is possible to chain several machines together, combining their power.

“Let’s say we get to get 256 qubits on a single chip, then our next goal is to build four systems and then network them together and that gets you to the 1024 you need,” Chapman explains. “We made it work in the lab; now what we do is produce it to run on the chip.

[Photo: IonQ]

The biggest technical obstacle for quantum computers to become truly useful is the instability of qubits. These are finicky little things that don’t maintain a “cohesive” state, which means they won’t sit still for very long. So, for every qubit that is stable enough to be used in a mathematical equation, many more must be awaiting error correction. The number depends on the materials and design used in the quantum chip.

IonQ’s secret sauce lies in the type of qubits it uses and how it places them on a chip. Chapman says that many quantum computers in development today use synthetic qubits mounted on silicon and connected and controlled with wires. Because qubits don’t like to be touched, these factors open the door to instability and error. IonQ qubits are charged ions derived from atomic isotopes of a rare earth metal called ytterbium. Ionic qubits float in an electromagnetic field inside an airtight “trap” and are controlled using photons. Chapman says these factors contribute to greater stability and fewer errors.

While quantum computers are not yet fast enough to take over from traditional supercomputers, there are good reasons why some companies are buying the technology early.

Financial institutions will be among the first companies to benefit from it. Many of them are already setting up quantum research departments and working on algorithms that harness quantum computing. Financial institution Fidelity uses IonQ to create quantum algorithms that ingest a lot of historical financial data to determine the chances of a borrower defaulting on a loan. Goldman Sachs is developing algorithms to determine how the movement of the price of one stock is affected by the movement of another. Currently, Goldman’s algorithm can only analyze two stocks at a time, but with more computing power the algorithm will expand to analyze the hidden nuances of the price interactions of thousands of stocks. These algorithms could one day be the basis of entire economic models, so the companies that develop them have a real interest in patenting them upstream.

This helps explain why IonQ is going public now, as opposed to two or three years from now when it expects to be able to offer 1000 qubit compute. Chapman says IonQ needs the proceeds from the IPO to accelerate development of its future 64-qubit chip, and since the company plans to build a rackmount enclosure around this chip and sell it, it also expects to incur contract manufacturing costs. “PSPC has given us access to capital to accelerate our growth faster than a traditional IPO,” Chapman said.

The quantum computing value proposition still contains big ifs. We can learn a lot about the investing public’s confidence that considerable quantum barriers can be overcome by observing the value of “IONQ” after it opens on the NYSE on Friday.

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