Rare earths are used in many parts of modern military systems, such as the Tomahawk missile, which relies on samarium-cobalt magnets in its actuators and guidance tail fins to withstand high heat. 

For years, the U.S. has been overly dependent on China, which controls about 80% of the world’s rare earth supply.  However, as we’ve learned the hard way, that has to change. After all, without rare earths, the world can’t produce the millions of electric vehicles government leaders want on the roads. 

We can’t produce smartphones, computers, flat panel televisions, wind turbines, electric vehicle batteries, computer chips, defense equipment, semiconductors, digital cameras, or catalytic converters.  Even the U.S. Department of Defense could run low on rare earths for rare earths and other warfighting products.

The good news is that the world is on its way to breaking its dependence on China. For investors, that also means there can be opportunities in some key stocks in this sector.

USA Rare Earth

Shares of USA Rare Earth (NASDAQ: USAR) have been explosive.

Fueling upside, the company just got a buy rating from analysts at Benchmark, with a price target of $15. Benchmark noted that USAR’s plans to construct a 1,600-metric-ton-per-annum oxide processing facility in Lacq, scheduled for commissioning in late 2026, will help strengthen Europe’s rare-earth supply chain.

“The French government will provide substantial subsidies for the project, covering 45% of eligible equipment costs and €130 million for real estate expenses,” added Investing.com.

Helping, USAR also has more than $3 billion in potential funding, including a potential $1.6 billion from the U.S. Commerce Department to build a domestic rare earth and critical mineral supply chain, CEO Barbara Humpton said in an interview with Bloomberg.

“The defense sector knows that they need to choose different sources of supplies from China,” the CEO told Bloomberg. “The conversations we are having today say that they are willing to make commitments years from now in order to ensure that supply.”

MP Materials

 We also have to consider that MP Materials (NYSE: MP) has become a powerhouse stock after announcing a deal with the U.S. Department of Defense in July 2025, which would help accelerate the build-out of an end-to-end U.S. rare earth magnet supply chain and reduce foreign dependency.

As noted in a company press release, “Rare earth magnets are one of the most strategically important components in advanced technology systems spanning defense and commercial applications. Yet today, the U.S. relies almost entirely on foreign sources. This strategic partnership builds on MP Materials’ operational foundation to catalyze domestic production, strengthen industrial resilience, and secure critical supply chains for high-growth industries and future dual-use applications.”

VanEck Rare Earth and Strategic Metals ETF

With an expense ratio of 0.58%, the VanEck Rare Earth and Strategic Metals ETF (NYSEARCA: REMX) attempts to replicate the performance of the MVIS Global Rare Earth/Strategic Metals Index, which is intended to track the overall performance of companies involved in producing, refining, and recycling of rare earth and strategic metals and minerals. Some of its 30 holdings include MP Materials, Lynas Rare Earths (OTCMKTS: LYSCF), Albemarle (NYSE: ALB), Pilbara Minerals (OTCMKTS: PILBF), and Ganfeng Lithium (OTCMKTS: GNENF).

Why Rare Earth Stocks Are Gaining Strategic Importance

The growing strain on U.S. rare earth supplies is more than a short-term geopolitical issue—it’s a long-term national security and industrial priority. As defense demand accelerates and clean energy transitions continue, the need for a reliable, domestic supply chain is becoming critical.

That shift is already creating momentum for companies positioned to fill the gap. USA Rare Earth offers early-stage upside tied to funding and infrastructure buildout, while MP Materials provides a more established, government-backed pathway to domestic production. Meanwhile, the VanEck Rare Earth ETF gives investors diversified exposure to the global supply chain.

For investors, the takeaway is clear: rare earth elements are no longer a niche commodity—they are a strategic asset. As the U.S. works to reduce its dependence on China, these stocks could remain in focus for years to come.

But it may not be time to call all clear on rare earth stocks. Things could spiral out of control again.

That’s because China now wants to prevent the U.S. military from getting its rare earth supply. 

As noted by CNBC, “Beijing will not allow the export of rare earth materials for use by foreign militaries, China’s Ministry of Commerce announced on October 9. These are the first restrictions imposed by China that specifically target the defense sector, according to Gracelin Baskaran, a critical minerals expert at the Center for Strategic and International Studies.”

Considering rare earths are critical in U.S. weapons systems, this could get bad again. If that’s the case, investors may want to jump into rare earth stocks again, including:

Rare Earth Stocks to Buy: MP Materials

One of the biggest rare earth winners of the bunch has been MP Materials Corp. (NYSE: MP). Since late April, MP stock has raced from about $25 to a current price of $56. And even after a pullback of over 24% in the last three months, MP stock is up more than 263% in 2025.

JPMorgan believes MP is set to benefit from supply-demand issues. The firm upgraded the miner to an Overweight rating with a price target of $74 a share. That’s only slightly below the consensus price target of $79 per share, a 41% gain from its price as of this writing.

“Our new rating reflects our view that rare earths national security concerns are ‘here to stay’ despite China’s reported one-year pause on export restrictions, with risks remaining, especially for military exposure,” they said, as quoted by CNBC. 

“MP’s unique mine-to-magnet vertical integration positions the company as the ex-China leader ready to immediately begin addressing these concerns, although it will ultimately take multiple players over many years to sort out.”

Rare Earth Stocks to Buy: USA Rare Earth

USA Rare Earth (NASDAQ: USAR) is a development-stage critical minerals company focused on advancing a fully integrated rare earth element (REE) and lithium project in the United States.

The financial crisis of 2007-2008 introduced the phrase “too big to fail” as it related to the top U.S. banks. In 2025, the term applied to USA Rare Earth might be “too important to fail.”

The company recently announced that the United Kingdom (UK) approved USAR’s acquisition of Less Common Metals (LCM) positions the company to be a critical second source for rare earths.

It’s important to note, however, that USAR is still a development-stage company and won’t begin commercial operations until 2026, at the earliest.

Analysts at Benchmark have a buy rating on the USAR stock. The firm cites a recent executive order from President Trump that prioritizes the development of rare earths in the United States. They also cited the company’s commercial production of rare earth magnets by 2026.

Rare Earth Stocks to Buy: Lynas Rare Earth

Another way to trade or invest in rare earth stocks is with Lynas Rare Earth (OTCMKTS: LYSCF). The Australian company engages in the exploration, development, mining, extraction, and processing of rare earth minerals primarily in Australia and Malaysia. The company holds an interest in the Mount Weld project, Western Australia.

LYSCF stock is not traded on a major U.S. exchange. As a consequence it doesn’t receive significant analyst coverage. Nevertheless, risk-tolerant investors will note that the stock is up more than 145% in 2025, making it one of the top choices in this promising sector.

Rare Earth Stocks to Buy: VanEck Rare Earth and Strategic Metals ETF

Investing in rare earth stock is still in the speculative stage. That doesn’t mean it won’t be profitable. But that day is not today. One way for you to hedge against downside risk in any specific stock is with the VanEck Rare Earth and Strategic Metals ETF (NYSEARCA: REMX).

With an expense ratio of 0.56%, the ETF provides direct access to the rare earth and strategic metals markets. Plus, according to VanEck, “Companies must derive at least 50% of total revenues from the rare earth/strategic metals industry to be added to the Index.”

The fund provides exposure to a variety of sectors and subsectors within the Materials and Metals & Mining sectors. Over 75% of the fund’s holdings are from U.S., Chinese and Australian companies.

The Time is Now

Rare earth stocks remain a high-risk, high-reward corner of the market, but geopolitical tensions continue to make them impossible to ignore. China’s latest restrictions show how quickly supply chains can be disrupted, especially for the U.S. defense sector.

For investors, the best approach is selective exposure, favoring established producers, promising U.S. developers, or diversified ETFs.