Rare earth stocks rallied sharply on Monday after the Trump administration announced a major equity investment in USA Rare Earth (NASDAQ: USAR), underscoring Washington’s escalating push to secure critical mineral supply chains and reduce reliance on China.
Shares of USA Rare Earth jumped as much as 12% following news that the company will receive $1.6 billion from the U.S. Department of Commerce in exchange for an equity stake. The deal also includes collaboration with the Department of Energy on a $1.3 billion loan package and an additional $277 million in federal funding. Industry peers such as MP Materials, Energy Fuels, and Trilogy Metals also saw early gains, reflecting renewed investor enthusiasm across the sector.
Under the agreement, USA Rare Earth will issue 16.1 million shares of common stock and approximately 17.6 million warrants to the Department of Commerce. The company simultaneously announced a $1.5 billion capital raise, significantly strengthening its balance sheet and accelerating development timelines.
The funding is expected to fast-track USA Rare Earth’s vertically integrated strategy, spanning mining, processing, and magnet manufacturing. Key assets include the company’s magnet plant in Stillwater, Oklahoma, and its Round Top rare earth deposit in West Texas, which is slated to begin commercial production in 2028. Once operational, these facilities could play a crucial role in supplying domestic demand for permanent magnets used in defense systems, electric vehicles, data centers, and advanced manufacturing.
This move fits squarely within a broader government strategy to onshore critical mineral production. China currently dominates global rare earth mining and processing, a strategic vulnerability the U.S. has been actively working to address. In 2025, the Pentagon became MP Materials’ largest shareholder after purchasing $400 million worth of stock. Similar government-backed deals were announced last year with Lithium Americas and Trilogy Metals.
Rare earth elements sit at the center of some of the fastest-growing and most strategically important industries, including artificial intelligence, defense technology, renewable energy, and advanced electronics. As AI data centers proliferate and defense spending increases, demand for these materials is expected to rise sharply over the coming decade.
Strategists argue that direct public-sector involvement materially changes the risk profile for rare earth miners. According to Sprott Asset Management, government participation enhances revenue visibility, mitigates project execution risk, and increases the likelihood that new capacity actually comes online. For investors, this reduces dependence on speculative capital markets and supports higher long-term valuations.
The geopolitical dimension is also intensifying. President Trump recently indicated that a future framework deal with NATO over Greenland could include access to rare earth mineral rights, signaling that resource security is becoming a core component of U.S. foreign and defense policy.
While rare earth stocks remain volatile and capital intensive, the growing alignment between government priorities and private miners provides a powerful tailwind. For small-cap investors, the sector is increasingly less about speculation and more about strategic relevance. As Washington continues to write checks—and take equity stakes—the message is clear: rare earths are now a national priority.