What Rare Earths Stock Can Best Deliver Gains From America's Reshoring Boom?

Every investment you make requires you to balance risk against reward. That can be a difficult process, and it is highly individual. Still, there are usually different ways to play the same investment idea. Rare-earth metals provide an interesting example.

Here's why rare-earth metals are such an interesting investment opportunity. And why some investors will prefer MP Materials (NYSE: MP) over USA Rare Earth (NASDAQ: USAR). And only a select few will favor TMC The Metals Company (NASDAQ: TMC).

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An untenable situation exists in rare-earth metals

Most rare-earth metals come from China. China has proven it is willing to use access to rare-earth metals as a geopolitical bargaining chip. On the surface, that is a problem, but this situation gets even more difficult to defend when you understand the importance of rare-earth metals.

Rare-earth metals are used in everything from cellphones to automobiles. The last time China got stingy with rare-earth metals, a range of car companies warned that production could be compromised. Electric vehicles would likely be the hardest-hit segment of the auto market if rare-earth metal supplies were limited, given their electric motors, but the materials are used throughout the car-making process.

However, there's another wrinkle here: rare-earth metals are also widely used in the defense industry. That includes everything from electrical devices to vehicles to missile defense systems. A sovereign nation simply can't allow another country to control its access to rare-earth metals. This is why the United States and many other countries are looking for alternative sources of rare-earth metals. MP Materials, USA Rare Earth, and The Metals Company are all positioning themselves to help solve this problem.

Different stages of development

MP Materials, USA Rare Earth, and The Metals Company are all start-up businesses. So they aren't likely to be good options for risk-averse investors. That said, they are all at different stages of their development. Thus, they are likely to interest different types of investors.

MP Materials is probably the furthest along as a business. It operates a rare-earth metals mine in California. And it has the processing facilities to turn those metals into usable products. Moreover, it posted an adjusted profit in the first quarter of 2026. The company appears to be on the verge of becoming sustainably profitable.

USA Rare Earth is still building a mine in Texas. That's going to cost a lot of money, and it won't be completed for a couple of years. The company isn't currently profitable and likely won't be for a bit longer. That said, USA Rare Earth has made aggressive use of acquisitions to get its business up and running. It has material processing exposure in the U.S. and Europe, and recently acquired an operating rare-earth metals mine in South America. The company appears to be making good progress in its business, but its acquisition focus and lack of profits will likely turn off more conservative investors.

The riskiest choice, and perhaps the one with the most growth potential, is The Metals Company. The game plan is for the company to build an undersea mine. It is still seeking the regulatory approvals needed to get started. And even after it does get the green light, building a mine under the ocean is going to be even more difficult and expensive than building one on land. This is a very high-risk investment, and it will likely continue to bleed red ink for a long time to come. Only the most aggressive investors should consider The Metals Company.

You need to take a long-term investment approach

MP Materials, USA Rare Earth, and The Metals Company are best looked at as long-term investments. Although MP Materials is probably the furthest along, they are all at the very start of building their businesses. That is why there could be a huge opportunity for each company to serve the rare-earth metals needs of companies building production facilities in the U.S. market. And why the risk of investing in these three rare-earth metals stocks is high. If you decide to buy any of them, or all of them, go in with a long-term view.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends MP Materials. The Motley Fool has a disclosure policy.