Why Shares of USA Rare Earth Are Plummeting (Again) Today

The past couple of days have proven to be a rocky road for USA Rare Earth (NASDAQ: USAR) investors. While the rare-earth stock skyrocketed almost 90% higher from the end of September through the end of last week, investors have relented from sending the stock even higher into the stratosphere over the past couple of days. While there was material reason for shares declining on Tuesday, today, however, the stock's fall isn't directly attributable to any current news.

As of 10:53 a.m. ET, shares of USA Rare Earth are down 8.7%.

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What's new with USA Rare Earth? Nothing, evidently

With rare earths emerging as a significant point of contention between the United States and China, rare-earth stocks like USA Rare Earth have skyrocketed, but investors seem to be sensing that USA Rare Earth stock has hit a ceiling.

Whereas the company's leading rare earth peer, MP Materials, is reporting revenue -- and cash flow from operating activities -- from its production of neodymium-praseodymium oxide, USA Rare Earth is still working toward generating revenue. Thus, it represents a more speculative investment, which certainly doesn't appeal to investors with low risk tolerances.

USA Rare Earth is developing a facility to produce rare-earth magnets, which is expected to begin operations in early 2026.

Is the pullback in USA Rare Earth stock a buying opportunity?

While USA Rare Earth stock is certainly a valid opportunity for gaining rare-earth exposure, the company hardly has the same risk profile as the revenue-generating MP Materials stock. For investors comfortable with that fact and who are looking to carve out a niche of their portfolios for a high-risk, high-reward investment, today's pullback in USA Rare Earth stock provides a great buying opportunity.

Scott Levine has no position in any of the stocks mentioned. The Motley Fool recommends MP Materials. The Motley Fool has a disclosure policy.