Why IonQ Stock Is Falling Today

IonQ (NYSE: IONQ) stock has been on a roller-coaster ride so far in Thursday trading. After rising by as much as 13% early, the quantum-computing company's share price was down by 1.3% as of 12:30 p.m. ET. Meanwhile, the S&P 500 and Nasdaq Composite indexes were both up 0.2%.

IonQ stock initially gained ground following bullish coverage from DA Davidson. However, the stock has been highly volatile amid the market's response to Wednesday's interest rate news from the Federal Reserve, and IonQ shares have been down by as much as 2.8% in the session.

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IonQ started today up big on bullish analyst coverage

Before the market opened Thursday, DA Davidson published a note initiating coverage on IonQ stock with a buy rating. The firm's analysts assigned a one-year price target of $50 per share on the stock. As of this writing, that would imply upside of around 35%.

DA Davidson sees IonQ as a compelling pure play in the quantum-computing space and thinks that the company is positioned to capitalize on rapid growth in the category. The firm's analysts also believe that its trapped-ion qubit architecture offers advantages compared to approaches used by larger competitors including Alphabet and IBM. IonQ's share price initially surged following DA Davidson's coverage, but those gains evaporated as the market digested the Fed's 2025 outlook for interest rates.

Interest rate news is driving a tech-sector pivot

On Wednesday, the Federal Open Market Committee served up another 25-basis-point cut to the benchmark federal funds rate, but Fed Chairman Jerome Powell indicated that investors can only expect two additional rate cuts in 2025. Investors broadly had been expecting four rate cuts next year, and that less aggressive forecast led to big sell-offs in the stock market.

While tech stocks are climbing back Thursday, the gains have been concentrated among reliable large-cap names. In response to the softer outlook for rate cuts next year, investors are pivoting away from speculative growth stocks and toward mega-cap names that are considered lower risk and more reliable.

Quantum-computing stocks have otherwise enjoyed a recent surge of bullish momentum, with some investors looking to the category as a potential "next big thing" in the tech sector. But stocks in that category could be in for high levels of volatility in the near term if concerns about interest rates, inflation, and other macroeconomic risk factors continue to cause investors to lean toward safer tech stocks.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool recommends International Business Machines. The Motley Fool has a disclosure policy.