Potential Gains in US Rare Earth Stocks: Predicted Surge from $10,000 to $30,000 by 2030?
The U.S.-China relationship, which has become increasingly adversarial, has highlighted the importance of finding alternative sources for essential minerals. One company at the forefront of this shift is USA Rare Earth.
Recent signs of a potential U.S.-China trade agreement have put pressure on USA Rare Earth's valuation, but the company's potential geopolitical benefits make it an attractive investment, despite the high level of risk associated with its pre-revenue status.
In the past three months, USA Rare Earth's share price has experienced a significant boost, rising approximately 74%. However, the company's stock has seen a 14% drop since its public debut in March, coinciding with Chinese mineral shipments returning to their highest levels since January.
The company went public through a merger with Inflection Point Acquisition Corp. and has been benefiting from moves by the Trump administration to strengthen the U.S.'s abilities to produce rare-earth minerals domestically.
China currently accounts for around 70% of the global rare-earth mineral supply, making the single-biggest vector for geopolitical risk over the next five years the dependency on China for these minerals. USA Rare Earth's stock offers defensive benefits, particularly in relation to geopolitical risk.
The importance of domestic mineral sourcing makes USA Rare Earth's odds of tripling over the next five years look favorable. However, it's important to note that the company is heavily subject to permitting and regulatory approvals, and there is currently no publicly available data specifying the net worth or value of the company's founder or largest shareholders.
The stock market's performance since USA Rare Earth's public debut provides an interesting comparison. The S&P 500 has gained roughly 15% since the company's debut, while the Nasdaq Composite has seen a 21% increase.
In conclusion, USA Rare Earth presents an intriguing investment opportunity, given its potential to reduce the U.S.'s dependence on China for rare-earth minerals. However, investors should be aware of the associated risks and the company's pre-revenue status.
