Keith Noonan, The Motley Fool
4 min read
USA Rare Earth (NASDAQ: USAR) could play a crucial role in helping the U.S. and its allies source critical minerals over the next decade and beyond. China currently dominates the markets for the extraction and processing of rare-earth minerals, giving it considerable leverage and the ability to cut off the U.S. and other countries from these resources, which are crucial for defense systems and other technologies.
The U.S. and China are competing world powers, and there’s a real risk that the U.S. could see its access to rare-earth minerals dramatically reduced as geopolitical competition intensifies. USA Rare Earth is positioning itself to improve the company’s domestic rare-earth sourcing capabilities and reduce its reliance on potentially hostile foreign governments.
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USA Rare Earth is risky, but it has intriguing prospects
China using its dominant positioning in the rare-earth minerals industry as a powerful bargaining chip and political tool isn’t a hypothetical. It’s something that’s already happening. In response to tariffs and restrictions imposed by the U.S. on the export of advanced artificial intelligence (AI) chips and semiconductor manufacturing equipment, China implemented a ban on rare-earth exports in October 2025.
Subsequent negotiations resulted in a temporary lifting of the ban, but some Chinese companies have recently canceled exports to the U.S., and exports to Japan remain heavily restricted. China has also banned exports of technologies and products to mining specialists including USA Rare Earth and MP Materials on the grounds that they could be used to support China’s military adversaries.
The solidification of conditions that will lead to strong demand for USA Rare Earth’s mining output seems to be quite clear, but that hasn’t stopped the company’s share price from seeing big pullbacks this year. The company’s stock has fallen roughly 15% across 2026’s trading, and it’s down roughly 74% from the lifetime high that it reached last October.
Despite the big pullback, investors should approach USA Rare Earth with the understanding that it’s not a low-risk stock. Excluding the recently acquired Brazil-based mining company Serra Verde, USA Rare Earth is still basically a pre-revenue business. Supply agreements that the company has signed with the U.S. government provide some pricing floor guarantees and safety, but success for the stock may still hinge heavily on commanding higher prices and achieving sufficient levels of operational efficiency with mining and processing.
