The Scorpion and the Qubit

IonQ: Doomed or Misunderstood?

Disclaimer: I maintain a small long position in $IONQ. Nothing you read below is financial advice, it’s for informational purposes only, etc etc.

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Quantum twitter was slightly set abuzz by Scorpion Capital’s release of a new short report, this one targeted at IonQ.

At first glance, I have no idea what to make of this ‘report’. It reads more like an unhinged rant from a crackpot rather than a document presenting the result of ‘25 research interviews’ that has uncovered an (alleged) pattern of fraud. You’d think that Scorpion could hire someone literate enough to put this into some sort of cogent form that doesn’t read like the National Enquirer just discovered quantum computing.

Nonetheless, I thought it would be an interesting exercise to read through the whole thing and just try to evaluate it on its actual content. It turns out to be a fascinating document, which both captures really serious business problems and completely misses the mark on the technical/physics problems. I think this latter effect is due entirely to misunderstanding what IonQ is, or rather, what it is supposed to be. I can’t find the tweet now, but I think it was Nick Farina of EeroQ who (correctly) identified IonQ as essentially an R&D company funded through public markets. When viewed through this lens, the overwhelming majority of the Scorpion report on IonQ is basically irrelevant. That the Scorpion team doesn’t seem to understand this suggests that they need to spend more time reading this blog¹.

Kidding aside, you can kind of see this unfamiliarity with the current state of QC in the interview questions included in the report. The interviewer is asking questions with the implicit belief that IonQ is a company that should have a real business model and be trying hard to book revenue and have a functional, high quality product. That’s just not what IonQ really is or should be. To the extent that IonQ as a corporation is trying to present itself that way, it is a mistake. Nonetheless, the true state and limitations of IonQ’s tech is more or less obvious to A) anyone who has any expertise in QC at all and B) people who read the S-1 or other docs in any detail at all. Serious investors should not be surprised by anything technical covered in the IonQ Short Report.

OK, let’s get to the breakdown.

The Irrelevant

Let’s start with the points that I think are basically irrelevant/widely known. I think most of these are basically non-issues, easily discoverable, and, crucially, expected features of a company like IonQ that is actually a market-funded R&D effort.

Some Physicists Think QC is Impossible

Some physicists (Gil Kalai, Victor Galitski, Sankar Das Sarma, and Mikhail Dyakonov²) have made strong statements against the feasibility of QC at all, and/or against QC hype. On this evidence, the report implies that all of quantum computing is a sham, not just IonQ. Luckily, you don’t need to know anything about QC to evaluate these claims. Just because a few of these guys think that QC will never work and have prestigious institutions like ‘Yale University’ attached to their names, doesn’t mean we have to lend much credence at all to their opinions. There are many very smart people on the other side who have staked their careers and reputations on QC being quite feasible, some of whom also happen to be professors at Yale (or Harvard, or U Chicago, or CalTech, or Berkeley, or MIT, or UPenn, or …). This one is a wash for me. Their arguments are noted, but a non-expert should not be swayed by this without more conclusive evidence.

The IonQ QPU(s) Suck

The IonQ machines:

1. Have poor gate fidelity, their outputs are garbled, they can’t even calculate 1+1 without errors

2. Are too big, not small like IonQ PR claims. Realistically they’re the size of an optical table or larger, depending on what you think is a quantum computer

3. Are glorified toys, not suitable for anything useful

4. Are totally unreliable with uptimes ~50%

5. Are slow AF

6. Don’t exist in any form with 32 algorithmic qubits

7. Will never scale with photonic interconnects

8. Use too many screwdrivers?³

To my mind, the report undermines itself on a few of these (1, 2, 6) where they specifically call out footnotes in the IonQ investor presentation, as well as text in the S-1 that directly admit to many of these things. Let me quote again from the S-1.

We have not produced a scalable quantum computer and face significant barriers in our attempts to produce quantum computers. If we cannot successfully overcome those barriers, our business will be negatively impacted and could fail.

Producing quantum computers is a difficult undertaking. There are significant engineering challenges that we must overcome to build our quantum computers. We are still in the development stage and face significant challenges in completing development of our quantum computers and in producing quantum computers in commercial volumes. Some of the development challenges that could prevent the introduction of our quantum computers include, but are not limited to, failure to find scalable ways to flexibly manipulate qubits, failure to transition quantum systems to leverage low-cost, commodity optical technology, and failure to realize multicore quantum computer technology.

Additional development challenges we face include:

• Gate fidelity, error correction and miniaturization may not commercialize from the lab and scale as hoped or at all;

• It could prove more challenging and take materially longer than expected to operate parallel gates within a single ion trap and maintain gate fidelity;

• The photonic interconnect between ion traps could prove more challenging and take longer to perfect than currently expected. This would limit our ability to scale beyond a single ion trap of approximately 22 logical qubits;

• It could take longer to tune the qubits in a single ion trap, as well as preserve the stability of the qubits within a trap as we seek to maximize the total number of qubits within one trap;

•  The gate speed in our technology could prove more difficult to improve than expected; and

• The scaling of fidelity with qubit number could prove poorer than expected, limiting our ability to achieve larger quantum volume.

AND ALSO

Our 32-qubit system, which is an important milestone for our technical roadmap and commercialization, is not yet available for customers and may never be available.

We are developing our next-generation 32-qubit quantum computer system, which has not yet been made available to customers. We expect this system to have 22 algorithmic qubits, i.e., qubits that are usable to run quantum algorithms, but the number of algorithmic qubits available in this system has not been finalized and may be fewer than planned. The availability of this generation of quantum computer system for customer use or independent verification by a third party may be materially delayed, or even never occur. Additionally, the future success of our technical roadmap will depend upon our ability to approximately double the number of qubits in each subsequent generation of our quantum computer. Accordingly, our technical roadmap may be delayed or may never be achieved, either of which would have a material impact on our business, financial condition or results of operations.

This is all in the documents that IonQ has to submit to the SEC. Literally any idiot with an internet connection can learn this about IonQ, just by searching for their SEC documents. You don’t need to be a sophisticated investor to find this stuff.

Moreover, these deficiencies of the IonQ hardware are kind of the point. The company exists to fix these issues where possible, and find a new path forward where a fix cannot be had.

IonQ Deal Flow and Revenue Sucks

The report alleges that:

1. IonQ’s partners are not paying for compute time on IonQ machines

2. IonQ’s partners are dissatisfied with the IonQ hardware/software

3. “IonQ’s revenue and bookings are driven by phony related-party deals and round tripping, creating the illusion of commercial momentum prior to listing via SPAC”.

This one is actually borderline for me. These points are both relevant and irrelevant. The whole point of SPACing IonQ, if you are serious about making a quantum computer, is to raise over half a billion dollars to fund serious R&D for the next 4-6 years to make something that works well enough to either raise more money, or entice commercial partners to pay to use the hardware, thereby raising money.

In my mind, pursuing partnerships and loudly announcing them is missing the point. Having partners pay for compute time is missing the point. The whole point is that there’s $600M available for IonQ to staff up, get some serious technical partners and grind out some real, exciting advances to the QC state of the art before the cash is gone.

The reason I think this critique is borderline is that, plausibly, pursuing paying partners and the publicity that entails is diverting money and energy away from solving the problems that will kill the company in 4-6 years.

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The Relevant

Despite the many irrelevant points the report raises, there appear to be some real, systemic problems which absolutely must be corrected to optimize the odds that IonQ survives past 2030.

The Co-Founders Are Not Really Committed to IonQ

Both Chris Monroe (Chief Scientist) and Jungsang Kim (CTO) have somehow also retained their (tenured) academic positions and continue to maintain substantial research groups while also being IonQ co-founders and, in Prof. Kim’s case, executives and board members.

I have long thought this was, to put it mildly, extremely weird and wrong. I had just assumed that Monroe and Kim would be mostly focused on IonQ, since there are tens of millions of dollars at stake for them, at the expense of their academic labs, grad students, and post-docs.

According to the report, my assumption was incorrect⁴, and Profs Monroe and Kim are said to be mostly absent from IonQ’s offices. It is a little weird that Chris Monroe took a position at Duke University (Jungsang Kim’s institution) when IonQ is literally located on UMD’s campus.

Since when is being C<X>O of a research effort ostensibly worth more than $1B considered part-time job? How did what look like serious venture capitalists look at this and decide this was OK? Why has the board permitted this state of affairs? The long term success of IonQ fundamentally depends on sound technical and scientific leadership. Unimaginable wealth is at stake here and we’re just going to pretend this is OK?⁵

Is the fact that IonQ fidelities haven’t increased in years a symptom of inadequate technical leadership at the highest levels?

IonQ Can’t Keep High Profile Hires

Both Dave Bacon and Denise Ruffner were fairly high profile hires in late 2020 who basically left the company within 1y or 1y 2mo, which is pretty quick for VPs. Although they made no public statements impugning IonQ, rumors swirl pretty fast and you don’t see this sort of thing happen very often. I don’t know much about Denise Ruffner, but Dave Bacon has a sterling reputation in the field, so if IonQ could lure him from Google, but not keep him, that’s not a great sign.

Alone these departures wouldn’t be much signal, I think, but the two of them leaving within a few months of each other paired with the questionable leadership at the executive level is pretty damning in my view.

Hype, Hype, Hype

Much of the report is devoted to how the IonQ press-releases and statements by CEO Peter Chapman⁶ are very liberal with the true scope of IonQ’s achievements (if any). Indeed, there was a thread a few months ago about whether it was actually possible to lie about the future, inspired entirely by yet another piece of IonQ PR. And, of course, who can forget the ‘expected 4,000,000 quantum volume’?

I’m not sure how much of a critical problem it is that the CEO makes wildly overblown public statements. The report alleges that his leadership qualities are otherwise lacking, and his actual knowledge of quantum anything is non-existent.

I think the impact of the non-stop hype is mostly that it’s distracting for the scientists and engineers who are having their work misrepresented. Also, does IonQ really need a PR department and a CEO like this? Are either of these effective or efficient uses of limited resources that really should be fully devoted to cracking the legion of insanely hard technical problems IonQ is facing?

The Conclusion

I’ve written a little bit about the valuation of IonQ in the past. My point was that there’s not really a compelling reason to value it much above the current cash balance + physical assets, we have to wait for some real, tangible progress to sustain valuations above $2B. In light of this, the idea that IonQ should be shorted isn’t that unreasonable. Though, as we’ve seen, many of Scorpion’s reasons for shorting IonQ are basically non-issues if you consider IonQ to be a public-market funded R&D company instead of a more traditional corporation focused on sales and profitability. We expect them to have a shitty device with garbage fidelity, and we expect them to miss milestones and alter approaches, that all comes with the deep-tech territory. My bull-case for IonQ would be that the technical talent they can attract, and the technical leadership the founders provide is enough to grind through the really hard problems (using up their $600M war chest in the process) in time to build a product that could maybe solve real world problems.

I don’t recall seeing Scorpion Capital suggesting a price target for IonQ, so it’s not clear whether they believe it has finite, non-zero value. Based on the inflammatory language in the report itself, it seems like the writers believe IonQ is a 0. Currently that is wrong, but in 2027? 2030? I would want to see some more conviction from the founders and less hype production from the CEO/PR team before I believe IonQ will survive into the next decade. Let’s maybe see a 32 qubit QPU, instead?

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1. Or email me at quantumobserverblog (at) gmail (dot) com

2. I’m annoyed that this report managed to misspell both Prof. Das Sarma’s and Prof. Dyakonov’s names.

3. See slide 70.

4. Or perhaps incomplete. One could imagine that both IonQ and the grad students could be being neglected.

5. If you’re a QC startup looking for a CTO or CSO to provide part-time technical leadership, see footnote 1 and shoot me an email.

6. Whose name is misspelled as “Pater Chapman” on slide 38.