Trump administration invests in another rare-earth company. Should you buy the stock?

By Tomi Kilgore

USA Rare Earth said it was given access to $1.6 billion in government funding, and will issue the U.S. Dept. of Commerce 16.1 million shares about 17.6 million warrants

USA Rare Earth's stock soars after a partnership with the Trump administration, which gives the rare-earth company access to $1.6 billion in funding.

Rare-earth stocks have surged, returning to the Wall Street spotlight on Monday after the Trump administration announced an investment and partnership with another company in the sector - an industry it deems vital to national security.

The Trump administration's latest deal is with USA Rare Earth (USAR). The Oklahoma-based company announced Monday a letter of intent with the U.S. Department of Commerce and collaboration with the U.S. Department of Energy for access to $1.6 billion in funding, including nearly $300 million in federal funding and $1.3 billion in a loan under the Chips Act.

And the company will also issue 16.1 million shares of common stock to the Dept. of Commerce, which represents 12.1% of the total common shares outstanding as of Oct. 31. The company is also issuing 17.6 million in warrants, which could boost the ownership stake to as much as 25%.

That's not all. The company said received a common-stock investment from a group of private investors of $1.5 billion. The investment was through the purchase by the group of 69.8 million shares at $21.50 a share, which represented a 13.2% discount to Friday's closing price.

In total, the company raised $3.1 billion in capital.

USA Rare Earth's stock hiked up 12% in recent midday trading, but pared earlier intraday gains of as much as 29.5% seen after the open, and as much as 61% seen in the premarket. The Financial Times reported over the weekend that the Trump administration was planning to take a 10% stake in the company.

Even before the stock's rally on Monday, it had already soared 47.5% amid a five-day win streak through Friday and had rocketed 108.2% in January.

"USA Rare Earth's heavy critical minerals project is essential to restoring U.S. critical mineral independence," said Secretary of Commerce Howard Lutnick. "This investment ensures our supply chains are resilient and no longer reliant on foreign nations."

The Trump administration said in July that it would buy as much as a 15% stake in another rare-earth company, MP Materials (MP). It took a 10% stake in Vancouver, Canada-based Trilogy Metals (TMQ) in October. The government has also taken a stake in lithium producer Lithium Americas (LAC).

Rare-earth elements are said to be critical to U.S. national security, as they are used in a wide variety of industries, including defense, high-technology and consumer products. China currently dominates the world market. That is a big concern for the Trump administration.

Investors who had bought into the sector in anticipation of the U.S. government taking stakes have done well. But those who have waited have seen mixed returns.

MP Materials' stock was trading 111.9% above where it closed on July 9, 2025, which was the day before the Trump deal was announced. Trilogy shares have climbed 210% since Oct. 6, which was the day before the U.S. government stake was announced.

For investors who waited to buy until after the news was announced, MP Materials' stock has gained 40.7% since the July 10 close, while Trilogy shares have eased 0.3% since the Oct. 7 close. And Lithium Americas' U.S.-listed stock closed at $7.04 on Oct. 1, the day the Trump investment was announced. It has 12.8% since then.

Among other companies in the rare-earth business, Ramaco Resources shares (METC) sank 17.4% in midday trading Monday, as the prospects of a U.S. government investment in the near term appeared to be reduced with the latest move.

Raymond James analyst Ben Kallo wrote in a note to clients that investors shouldn't be deterred by the USA Rare Earth news, as he believes there will be more government investments to come, with Ramaco "a likely beneficiary.

Elsewhere, United States Antimony's stock (UAMY) was down 14.8% on Monday and NioCorp Developments' shares (NB) shed 12%.

-Tomi Kilgore

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

01-26-26 1158ET