Rare earth stocks are shining brightly on investors’ radars these days. Shares of USA Rare Earth (NASDAQ: USAR), for example, climbed 11.4% last week, and they’re continuing to soar higher today. As of 11:17 a.m. ET, USA Rare Earth stock was up 11.6%.
Although USA Rare Earth hasn’t reported any news today to explain the rising share price, it’s unsurprising that bulls are racing to buy the stock. Investors may be bidding the stock higher on speculation that the company will secure a similar agreement to the one announced last week by MP Materials (NYSE: MP) with the U.S. government.
The MP Materials Deal:
Last Thursday, MP Materials, the only U.S. company with a complete rare earth industry chain, announced a multi-billion dollar agreement with the government. The U.S. Department of Defense (DoD) will become the company’s largest shareholder, with a potential stake of 15%, surpassing the 8% stake held by the Chinese shareholder Shenghe Resources. The DoD not only set a minimum purchase price for the rare earths but will also help the rare earth miner build a new magnet factory called the “10X Factory”. This appears to be the first investment from a new sovereign wealth fund discussed by the Trump administration, aimed at securing government access to “critical minerals.”
Speculation for USA Rare Earth:
What’s good for the goose is good for the gander. Given the limited number of rare earth producers in the United States, investors are likely surmising that USA Rare Earth will either partner with the U.S. government or benefit from another catalyst to expedite its growth. USA Rare Earth is developing a rare earth magnet manufacturing facility in Oklahoma, where it plans to begin commercial operations in the first half of 2026.
USA Rare Earth may hope its company receives a similar deal, but there are significant differences between the two companies. The most crucial difference: As a commercial venture, USA Rare Earth is far behind MP Materials in its development.Last year, MP Materials produced 45,455 metric tons of rare earth concentrate oxides, 1,294 metric tons of NdPr oxide (NdPr oxide), and recorded $61 million in revenue. In contrast, USA Rare Earth had revenue of $0.
In light of the political enthusiasm for shoring up the nation’s domestic supply of rare earths, investors’ keen attention to USA Rare Earth stock is understandable. However, potential investors must recognize that the company is still in the pre-revenue phase of its development, making it a highly speculative investment. Therefore, investors less interested in higher-risk investments but seeking exposure to the rare earth sector would be better served by considering MP Materials at this point.
