The stock price of American rare earth companies rose by more than 230% in 2025.
The stock is still up about 20% this year, but is down more than 60% from its peak.
Only the most aggressive investors should consider this rare earths startup.
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Wall Street is a voting machine in the short term and a weighing machine in the long term, and emotions can lead investors to make questionable choices on a day-to-day basis. If you’re considering a purchase, here’s the backstory you need to keep in mind American Rare Earth(NASDAQ: USAR).
Here’s why this company’s story is so exciting, and why the smartest move remains to sit on the sidelines of this stock (or buy one of its peers).
American Rare Earth’s name is intended to convey a wealth of information about its business. The company’s primary goal is to mine and process rare earth metals, with a focus on production in the United States. These metals are used in everything from smart watches to missile defense systems. Without rare earth metals, the modern world would not exist.
Image source: Getty Images.
Most rare earth metals today come from China. This has always been a supply chain issue, but one that has come to the fore due to ongoing tariff negotiations around the world. Rare earth metals are one of China’s biggest bargaining chips, and China has made clear it will limit access to these products to gain the upper hand.
This is not surprising at all. In fact, from a bargaining perspective, this might be a good decision. However, this has prompted other countries to seek alternative suppliers of rare earth metals. July, MP material(NYSE: MP) It was announced that the U.S. government was making a significant investment in the company to support its expansion efforts. followed by apple and equity offerings, raising a total of approximately $1.5 billion.
Like U.S. Rare Earth Corporation, MP Materials aims to build a business centered on the mining and processing of rare earth metals. However, MP Materials seems to be further along in the process.
Nonetheless, both stocks have seen shocking moves in 2025, largely due to news coverage. The stock price of American rare earth companies once rose by more than 230%, but then plummeted. It’s now up about 20% this year. This was a shocking move, and MP Materials’ stock price rose more than 500% at one point. After a sharp retracement, it is still up about 245%. One big difference is the U.S. government’s involvement in MP Material’s future. U.S. rare earth companies do not have the same support.
However, there is another, less subtle distinction that investors need to understand. MP Materials owns a production mine. American Rare Earth Corporation plans to build a mine, which is still in the feasibility stage. While it currently has the ability to recycle and process rare earth metals, the big deal here is the mining opportunity – only the mine is still years away from completion, and a lot of problems could arise between now and then.
The sharp rise in U.S. Rare Earth’s stock price was likely driven by the news, which occurred around the time the company announced its acquisition of a rare earth metal recycling company. This was also the time when enthusiasm for MP Materials was at its peak.
The long-term outlook for U.S. rare earths remains highly risky and uncertain. Only the most aggressive investors should consider it, as it is currently losing money and will likely continue to lose money while making the large capital investments required to build the mine.
For most investors, U.S. rare earths are unlikely to be a wise investment choice. The risks are huge and the potential rewards remain highly uncertain, as the company’s plans to build a rare earth metals mine are still years away from being realized.
If you’re interested in rare earths stocks, a better bet might be MP Materials, which is furthering its growth as a rare earths miner. Even so, however, it might make sense for investors to stay on the sidelines until additional milestones are reached, such as positive earnings.
Before buying U.S. rare earth stocks, consider the following factors:
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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool owns and recommends Apple. The Motley Fool recommends MP materials. The Motley Fool has a disclosure policy.
Are U.S. Rare Earths the Smartest Investment Today? Originally posted by The Motley Fool
