Why Shares of USA Rare Earth Exploded 57% Higher This Week

Key Points

• USA Rare Earth is building a rare earth magnet mine and production facility in the U.S.

• These materials have become increasingly important since the trade ware with China broke out earlier this year.

• Stocks the U.S. government has acquired a stake in have soared.

• 10 stocks we like better than USA Rare Earth ›

Since the close of trading last week, shares of the magnet mining and production company USA Rare Earth (NASDAQ: USAR) had blasted roughly 57% higher, as of 11:14 a.m. ET Friday. The big move comes as media outlets report that the company is in talks with the Trump administration for the U.S. government to acquire a stake in the company.

A key government resource

Today, new USA Rare Earth CEO Barbara Humpton told CNBC that the company has been "in close communication" with the White House. "What we're doing is keeping the administration informed of our plans, and we expect that partnership to continue," said Humpton, according to Barron's.

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Image source: Getty Images.

The government has taken stakes in several publicly traded companies this year, including Lithium Americas, Intel, and MP Materials, another rare earth magnet company. Trade tensions with China led the country to freeze exports of rare earths materials to the U.S. earlier this year, which led the government to take a strong interest in domestic makers of rare magnets that are critical components in a number of important technologies.

Investors view a U.S. government stake in a company as bullish. Not only does it come with capital, but also a sense of downside protection because the government will want to protect its investment.

Is USA Rare Earth a buy after the recent surge?

USA Rare Earth is in the process of building a rare earth supply chain, but its operations are still not operational yet, so the company doesn't have any revenue and had lost over $90 million through the first half of the year.

This doesn't mean the company won't do well, but there's still much to be done. After a 60% run this week, I'd personally let things cool off a bit, especially until a deal with the Trump administration is official. If you want to play this catalyst, I'd keep investments fairly small and in the speculative part of your portfolio.

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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel. The Motley Fool recommends MP Materials and recommends the following options: short November 2025 $21 puts on Intel. The Motley Fool has a disclosure policy.