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Last year, the U.S. government made a historic investment in rebuilding critical material reserves by acquiring a stake in mining company MP Materials (MP). In the months following the announcement, the company’s stock price briefly surged to $100, but has since fallen 42% from its 52-week high. However, two super trends could drive the stock higher again.
Critical minerals are the foundational materials for modern technology, defense systems, and clean energy products. Rare earth elements are essential for magnets used in radar and defense technologies, while electric vehicles require large amounts of lithium, cobalt, and nickel.
The current challenge for the United States lies in China’s dominance over the supply chain for these minerals. According to research from The Motley Fool, China controls approximately 70% of global rare earth mining and 90% of processing operations. Therefore, rebuilding the domestic critical mineral supply chain has become the first trend that could drive MP Materials’ stock price upward.
The company operates the only remaining rare earth mining and processing facility in the United States, located at Mountain Pass in California. Last year, the U.S. Department of Defense entered into a historic public-private partnership with MP regarding the company’s neodymium-praseodymium (NdPr) products. As part of the agreement, the U.S. established a price floor of $110 per kilogram for NdPr products that are stockpiled or sold. In return, the Department of Defense received a 15% equity stake in the company.
This price floor, while unusual, is considered necessary because China heavily subsidizes rare earth production. By setting this price floor, the U.S. government locks in the purchase price of MP’s products, protecting the company from non-market pricing pressures from foreign competitors, thereby accelerating supply chain independence.
Another trend that could push the stock price higher is the booming development of artificial intelligence and automation hardware. AI data center cooling systems, industrial robots, and automated manufacturing equipment all rely on high-performance rare earth permanent magnets.
Hyperscalers are building large data centers that require advanced liquid cooling systems, which depend on efficient pumps driven by powerful neodymium-praseodymium magnets. Furthermore, advanced robots may require dozens of high-torque electric motors, each containing NdPr magnets to achieve precise, rapid movement.
The company has entered into a long-term agreement worth $500 million with Apple to build domestic infrastructure for recovering rare earth magnets from recycled electronics and supply chain scrap. It has also reached a long-term agreement with General Motors to provide U.S.-sourced rare earths, alloys, and magnets for its next-generation electric vehicles.
MP’s management is taking steps to expand production capacity, with a goal of launching a new facility by 2028 that will increase annual production of neodymium-iron-boron (NdFeB) rare earth magnets tenfold, reaching 10,000 metric tons.
Summary: Driven by strong government support for reshoring supply chains and technological innovation, MP Materials—leveraging its position as the only U.S. rare earth mining and processing facility, its historic partnership with the Department of Defense, and its price floor protection mechanism, combined with robust demand for high-performance magnets from AI and automation hardware—is poised to become a core rare earth stock benefiting from these two major trends. Despite recent declines in its stock price, if these structural trends continue to gain momentum, they could generate new growth drivers for the company.
