We recently compiled a list of the 7 Best Computer Hardware Stocks to Buy. In this article, we are going to take a look at IonQ, Inc. (NYSE:IONQ) against the other computer hardware stocks.

According to a report by Research and Markets, the computer hardware market is projected to grow from $674.44 billion in 2023 to $710.32 billion in 2024, with a 5.3% compound annual growth rate (CAGR), mainly driven by personal computing, global supply chains, internet expansion, and more data centers.

By 2028, the market is expected to reach $914.55 billion at a 6.5% CAGR, fueled by trends like remote work infrastructure, sustainable practices, smart city development, and digital transformation. Key trends include edge computing, AI integration, modular systems, biometric security, and hybrid cloud environments, with significant investments in smart city projects, particularly in China.

The most important trends in the advancement of computer hardware are AI and machine learning which are revolutionizing hardware design and enabling applications like autonomous vehicles and robotics. Apart from that, the Internet of Things (IoT) is expanding, connecting more devices in smart homes, cities, and industries. It has led to a focus on improving security, efficiency, and the ability of different IoT devices, systems, and technologies to work together seamlessly.

Role of AI in the Growth of the Computer Hardware Industry

On May 28, Michael Fertik, founder of Heroic Ventures, joined CNBC’s ‘Squawk Box’ and said that we’re still in a phase of AI development where hardware is crucial. Companies like NVIDIA are thriving because their products are essential for running large AI models, which require immense computational power. He said that this situation is similar to how search engines, like Google or Bing, have long relied on substantial investments in hardware to function effectively.

Fertik added that as AI technology evolves, there will be a shift. The costs associated with AI hardware will decrease, and smaller, more specialized AI models will emerge, which will be tailored for specific industries or purposes.

When this happens, the focus and financial gains will also move toward software and computer science (software testing and development) companies. However, they will not significantly move from computer hardware companies and they will still benefit from the growing AI industry.

Industry Has Room for Growth Beyond AI

A major growth prospect for computer hardware is quantum computing, an industry that is expected to reach $11.4 billion by 2027 from $2.74 billion in 2022, according to Research and Markets. Quantum Computing offers significant benefits by improving the speed and efficiency of complex computations.

Unlike classical computers, which process bits as 0s or 1s, quantum computers use qubits that can represent multiple states at once, which enables them to solve problems much faster. This is especially valuable in fields like cryptography, drug discovery, financial modeling, and optimization as it solves complex simulations and calculations that are currently infeasible for classical computers.

Quantum Computing can significantly benefit the computer hardware industry by driving advancements in technology and creating new markets. Similar to AI, the development of quantum hardware requires innovations in materials science, cooling systems, and chip design, which can push the boundaries of traditional hardware engineering.

As quantum computers become more practical, they will require specialized hardware components, which will create new opportunities for companies to develop and supply these advanced technologies. For more details, you can read our article about the 12 Best Quantum Computing Stocks To Invest In.

Our Methodology

For this article, we used stock screeners and other financial media websites to identify 12 computer hardware companies with market capitalizations of above $1 billion. The analyst comments and ratings were mostly taken from The Fly and TipRanks.

IonQ, Inc. (NYSE:IONQ)

Stock Price as of August 9: $7.12

Average Analyst Price Target Upside as of August 9: 47.47%

IonQ, Inc. (NYSE:IONQ) is the first publicly traded pure-play quantum computing company after it went public in October 2021. The company stands out as a pioneer in the quantum computing arena, which uses its knowledge of trapped ion technology to expand the limits of computing power. Trapped ion technology is a method used in quantum computing where individual ions (charged atoms) are used as quantum bits, or qubits, which are the basic units of information in a quantum computer. The technology enables complex quantum computations that are difficult or impossible for classical computers to handle. The company’s primary mission is to develop the world’s most advanced quantum computers.

On August 7, IonQ (NYSE:IONQ) released its Q2 earnings where it posted a revenue of $11.4 million, a 106.5% increase from the same period last year, and outperformed the estimates by almost $2.75 million. The company reported a GAAP EPS of -$0.18, which beat the analyst consensus by $0.04.

For the full year 2024, IonQ (NYSE:IONQ) raised its revenue guidance to the range of $38 million and $42 million, which is almost 72% to 91% above its 2023 revenue. And for the third quarter, the company expects revenue between $9 million and $12 million.

On August 8, Craig-Hallum revised its price target for IonQ (NYSE:IONQ) and lowered it from $21 to $15, but still maintained a Buy rating for the stock. The revised price target shows a nearly 111% upside to the company’s price target, as of August 9. The firm mentioned the company’s strong performance in the second quarter and its revised future guidance.

Craig-Hallum mentioned that although IonQ’s (NYSE:IONQ) recent technical advancements in gate fidelities and error correction may not make much sense to the average tech investor, these are important metrics in the quantum computing industry. The firm noted that while the company needs to follow through on its promises, it has consistently met its targets over nearly four years since going public.

IonQ (NYSE:IONQ) has been covered by 7 analysts. The average price target of $10.50 has an upside of 47.47% to the stock’s current price, as of August 9. The company takes the 3rd spot on our list of best computer hardware stocks to buy.

Overall IONQ ranks 3rd on our list of the best computer hardware stocks. While we acknowledge the potential of IONQ as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than IONQ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.

Disclosure: None. This article is originally published at Insider Monkey.