Should You Invest $1,000 in USA Rare Earth Right Now?
Key Points
USA Rare Earth is trying to build a supply chain of rare-earth magnets on U.S. soil.
The pre-revenue company controls one of the most significant rare-earth deposits in the U.S.
The company has federal backing, but several risks remain.
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In one way or another, they all rely on high-performance permanent magnets.
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These magnets generate their own magnetic fields without needing an external power source. They can do this through the atomic structure of their materials, which include rare-earth elements.
The majority of these magnets are produced in China, but a few U.S. mining companies are trying to bring the entire process, from mining to manufacturing, to American soil. One of those is the mining start-up USA Rare Earth (NASDAQ: USAR).
USA Rare Earth controls one of the most significant rare-earth deposits in the U.S. -- the Round Top Mountain in Texas. This polymetallic body contains 15 of 17 rare-earth metals, including significant deposits of lithium.
The company wants to process material from this site into permanent magnets. If it succeeds, it would help close one of the biggest gaps in America's supply chain by making those magnets on U.S. soil instead of importing them.
Image source: Getty Images.
The importance of home-grown magnets can't be overstated. Indeed, in early 2026, the Trump administration announced it would take a 10% stake in USA Rare Earth via a $1.6 billion deal. Funding from this package will be used to develop USA Rare Earth's Round Top mine in Texas and magnet manufacturing facility in Oklahoma.
Even with federal backing, the company isn't free from risk. It still needs to build a mine and its manufacturing arm, both of which will be costly. It also needs to contend with China, which is still the world's go-to for permanent magnets.
At this point, a $1,000 investment should be money an investor can afford to lose. Although the company has long-term potential, too many unknowns stand between it and meaningful cash flow. More conservative investors might be better served by a metal exchange-traded fund (ETF), especially one that invests in rare-earth companies.
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Steven Porrello has positions in USA Rare Earth. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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