It might seem risky to chase the hottest hypergrowth stocks as the Trump administration's unpredictable tariffs, elevated interest rates, and geopolitical tensions rattle the markets and drive many investors toward more conservative investments.
But if you can look beyond those daunting near-term challenges, it might still be a good time to buy a few of those volatile growth stocks as long-term investments.
Here are three hypergrowth plays that have enough momentum to head higher in a rough market this year: IonQ(NYSE: IONQ), Nu(NYSE: NU), and PDD(NASDAQ: PDD).
Image source: Getty Images.
1. IonQ
IonQ is one of the few pure plays on the nascent quantum computing market. Unlike traditional binary computers, which still store data in individual bits of zeros and ones, quantum computers store zeros and ones simultaneously in qubits. That approach enables them to process massive amounts of data at a much faster rate than binary computers, but they're also bigger, more expensive, and consume a lot more power. Quantum computers also produce more errors than binary computers.
IonQ sells high-end quantum computing systems and serves up it own computing power as a cloud-based service. It currently sells three quantum computers: its top-tier Aria system, its commercial Forte system, and its on-premise Forte Enterprise system. The company plans to launch its next system, the Tempo, this year.
IonQ's revenue surged 430% in 2022, 98% in 2023, and 95% in 2024. It expects its revenue to rise another 74% to 120% in 2025 as its quantum computing power increases.
The company is still unprofitable and might seem grossly overvalued at 46 times this year's sales, but analysts expect its revenue to grow at a compound annual growth rate (CAGR) of 89% from 2024 to 2027. Assuming it achieves that breakneck growth rate, IonQ looks a bit more reasonably valued at 13 times its 2027 sales. It's still a speculative play, but it could keep growing like a weed as the quantum computing market expands.
2. Nu Holdings
Nu, which is based in Brazil and also operates in Mexico and Colombia, is the largest online bank in Latin America. Its digital-only model enabled it to expand much faster than its brick-and-mortar peers, and its total number of year-end customers more than tripled from 33.3 million in 2021 to 114.2 million in 2024.
Nu's activity rate (active customers divided by total customers) also increased from 76% in 2021 to 83% in 2024 as it rolled out more checking, credit card, lending, insurance, investment, cryptocurrency, e-commerce, and business-oriented services. The company has also been rolling out more AI upgrades for its analytics tools, chatbots, and cybersecurity services.
Nu still has plenty of room to grow because the World Bank estimates more than 70% of Latin America's adult population is still unbanked. From 2024 to 2027, analysts expect its revenue and earnings per share (EPS) to grow at a CAGR of 32% and 40%, respectively, as it locks more of those customers into its sticky fintech ecosystem.
Those are incredible growth rates for a stock that trades at 20 times this year's earnings. Nu's valuations are likely being compressed by the inflationary and currency devaluation headwinds in Latin America right now, but it could grow much larger over the next decade. That might be why it's still one of Warren Buffett's top holdings.
3. PDD Holdings
PDD, also known as Pinduoduo, is China's third-largest e-commerce company by annual revenue after Alibaba and JD.com. PDD initially carved out a niche with its discount marketplace, and it subsequently launched an online farm-to-table agricultural platform and its Temu marketplace for overseas buyers.
From 2016 to 2023, PDD's revenue grew at a stunning CAGR of 142%. It also turned profitable in 2021 as it cut costs and phased out its lower-margin first-party marketplace.
From 2023 to 2026, analysts expect PDD's revenue and EPS to increase at a CAGR of 34% and 36%, respectively. Those are stunning growth rates for a stock that trades at 10 times its projected earnings for 2025.
But just like Nu, PDD's valuations are being squeezed by some near-term headwinds.
China's tepid economic growth, the Trump administration's tariffs, and the persistent tensions between the U.S. and China are likely causing many investors to broadly shun Chinese equities. However, if cooler heads prevail and those headwinds gradually wane over the next few quarters, PDD's stock might impress growth investors again and command a much higher valuation.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool recommends Alibaba Group, JD.com, and Nu Holdings. The Motley Fool has a disclosure policy.
