Here's Why USA Rare Earth Stock Is Tumbling Lower Today

Key Points

• USA Rare Earth is focused on the production of rare earth magnets.

• American Resources announced an expansion of its critical mineral refining facility.

• Investors in USA Rare Earth shouldn't fret about the expansion of operations for American Resources.

• 10 stocks we like better than USA Rare Earth ›

Markets may be nudging slightly higher today, offering investors the hope of ending the week on a positive note, but the same can't be said for rare earth stock USA Rare Earth (NASDAQ: USAR). While the company hasn't reported anything negative, news related to a rare earth peer has USA Rare Earth investors heading for the exits.

As of 2:44 p.m. ET, shares of USA Rare Earth are down 3.5%, recovering from their earlier decline of 10%.

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Image source: Getty Images.

Rare earth businesses in the U.S. are growing, and USA Rare Earth investors aren't happy

Thanks to its holding in ReElement Technologies, American Resources (NASDAQ: AREC) announced a 141% expansion of its critical mineral refining facility located in Indiana. With the expansion, the company now has near-term annual refining capacity of over 200 metric tons of ultrapure separated defense elements and rare earth oxides of 99.9% to 99.999% purity.

Nearing completion of its rare earth magnet production facility, USA Rare Earth has emerged as one of the key players among those involved in rare earth elements production. The company has drawn considerable interest from investors over the past year as President Trump has issued executive orders addressing a commitment to shoring up the domestic supply of rare earths.

Is now as good time to dig into USA Rare Earth stock?

Instead of digging deeply into the news from American Resources, investors in USA Rare Earth likely responded to the news with a knee-jerk reaction and trimmed their positions, surmising that the growth prospects of USA Rare Earth is now impeded. For USA Rare Earth shareholders, though, today's announcement shouldn't do much to sway them that the bull case is broken.

Of course, there are plenty of risks that remain for USA Rare Earth with the construction of its magnet production facility, and the company's success is far from guaranteed. But if you were optimistic about the prospects of USA Rare Earth yesterday, nothing has changed. In fact, today's pullback provides a great chance to build your position even further.

Should you invest $1,000 in USA Rare Earth right now?

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