Trump sees Lithium Americas as a vital investment. Here's why Wall Street agrees.

By James Rogers

The White House has made its latest move as part of a strategy to invest in industries seen as critical for national security

The federal government is taking a stake in lithium producer Lithium Americas and its Thacker Pass project in northern Nevada.

Lithium Americas Corp.'s stock soared Wednesday after details of the federal government's stake in the lithium producer were announced, underlining the industry's importance to the Trump administration.

The administration is showing its desire to step into industries it sees as vital for national security, and the Lithium Americas (LAC) move follows recent stakes in rare-earths producer MP Materials Corp. (MP) and in semiconductor giant Intel Corp. (INTC). Lithium is a key component in rechargeable batteries that power electric and hybrid vehicles, as well as a host of consumer electronics and household products.

The company's Thacker Pass lithium-mining project, a joint venture with a subsidiary of General Motors Co. (GM), represents a "massive opportunity" for the U.S. to reduce reliance on China and other countries that are seen as adversaries, Wedbush analyst Dan Ives said. He noted that while the U.S. has some of the world's largest lithium deposits, it produces less than 1% of the global supply.

Lithium Americas shares ended the session up 23.3%. Since Reuters reported last week that the government was seeking an equity stake in the company, the stock has run up 66.8%.

A GM subsidiary is one of Lithium Americas' largest shareholders, according to FactSet data. GM's stock rose 0.6% on Wednesday.

The Global X Lithium & Battery Tech exchange-traded fund LIT rose 1.3%, and shares of Albemarle Corp. (ALB), which is also involved in the lithium business, advanced 4.2%.

Investors have good reason to piggyback on the Trump administration's investment.

When the investment in Intel was announced on Aug. 22, the stock rallied 5.5%. Since then, it climbed another 44.9%. And since July 10, when MP Materials shares closed up 50.6% after the government stake was announced, the stock has seen a further gain of 49.5%.

Lithium Americas said late Tuesday it has reached an agreement in principle with the U.S. Department of Energy to receive the first draw of $435 million on a previously announced $2.26 billion loan it secured last year from the Biden administration.

As part of the deal, the DOE will receive a 5% equity stake in Lithium Americas, through warrants to buy common shares at an exercise price of a penny per share. At the current market capitalization of $1.6 billion, a 5% stake would be valued at about $80.1 million.

The DOE will also get a 5% economic stake in the Thacker Pass project, also through warrants with an exercise price of a penny per share.

The DOE also agreed to defer $182 million of debt servicing over the first five years of the loan.

In a statement, Lithium Americas CEO Jonathan Evans described Thacker Pass as a "vital" world-class project. "Together, we are onshoring large-scale U.S. lithium production, strengthening America's supply chain, creating exceptional jobs and enhancing our long-term energy security and prosperity," he said.

Lithium Americas describes the Thacker Pass in northern Nevada as the world's largest known measured lithium resource and reserve. Construction of the mine began in 2023, and "mechanical completion" is expected in 2027, Lithium Americas recently told MarketWatch.

The company said that it is on schedule to begin production in late 2027, and in 2028 will scale up to full production of 40,000 metric tons per year of battery-quality lithium carbonate.

But Jordan Blashek, a venture capitalist and executive chairman of Perimeter, a platform for investing in the U.S. national security sector, told MarketWatch that when the government takes an equity stake in a company, it is effectively picking winners. "That kind of favoritism forces executives to chase political favor instead of building durable shareholder value," he added. "This not only might lead to wild swings with each new administration, but also to legal challenges on constitutional grounds."

Blashek also warned that this could make American companies less competitive in the long run compared to global firms that focus on efficiency and value creation. "Washington should focus on the tools only it can provide (tax, regulations and loan guarantees), and leave capital allocation to the private sector, where the market rewards true competitiveness," he said.

-James Rogers

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10-01-25 1644ET