Rare Earths & Unicorns: A Cautionary Tale

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So, your phone. That little rectangle of doom and delight? It’s got magnets in it. Fancy magnets. And guess where most of those magnets come from? Not a quaint artisanal workshop in Brooklyn, that’s for sure. It’s China. Like, 94% of the magnets holding your life together are made there. Which, let’s be honest, is a little… unsettling. It’s like finding out your therapist is also your Uber driver. Convenient, maybe, but deeply problematic.

The U.S. government, in a rare display of long-term thinking (or panic, same difference), is now obsessed with building a domestic rare-earth magnet supply chain. Because relying on another country for the stuff that powers everything from electric cars to military drones? Turns out that’s not ideal. A bunch of companies are scrambling to be the American magnet savior. And one of those companies is USA Rare Earth (USAR +9.07%). They’re promising a magnetic revolution. Or, at least, a lot of paperwork.

What USA Rare Earth Does (and Why You Should Be Suspicious)

USA Rare Earth wants to dig stuff out of the ground in Texas—specifically, a place called Round Top—and turn it into magnets. It’s got 15 of the 17 rare earth elements, plus lithium, which is the new kale of the mineral world. Their plan involves mining, processing, and manufacturing, all under one roof. It’s a “mine-to-magnet” strategy. Sounds…ambitious. Like trying to host a dinner party for 500 people while simultaneously learning to play the banjo.

They’re also tinkering with new processing techniques, which is good. Lowering costs and reducing environmental impact? Excellent. It’s like admitting your coffee habit is unsustainable and switching to decaf. A noble gesture, but let’s not pretend it’s not still a struggle.

The Round Top deposit has a nice mix of rare earths, including some that are hard to come by domestically. Which means, if they can actually get it going, they could corner a niche market. It’s like being the only bakery in town that makes gluten-free, vegan, organic cronuts. You’ll have a loyal customer base, but it’s a very specific customer.

Why This Could All Go Horribly Wrong

Okay, let’s be real. USA Rare Earth currently has approximately zero revenue. Zip. Nada. Zilch. They’re running on hope and other people’s money. Which is a perfectly valid business model…until it isn’t. It’s like starting a podcast with no microphone and expecting to win a Peabody Award.

All their grand plans—the mining, the processing, the manufacturing—are just that: plans. They haven’t actually made anything yet. No magnets, no revenue, no proof of concept. They’re building a magnet factory in Oklahoma, but Round Top won’t be producing anything until, optimistically, 2028. That’s a long time to wait for a magnet. It’s like ordering a custom-made suit and finding out the tailor is a sloth.

A “mine-to-magnet” operation is complicated. It’s three businesses rolled into one. That’s a lot of moving parts. A lot of things that can go wrong. It’s like trying to juggle chainsaws while riding a unicycle. Impressive if you pull it off, but statistically unlikely.

Can USA Rare Earth Set You Up for Life? (Don’t Bet the Farm)

Right now, USA Rare Earth is valued at around $2.7 billion, despite having no meaningful income. The stock price is based on the potential for success. The hope that they can deliver blockbuster earnings. It’s a gamble. A speculative play. Like betting on a reality TV star to become a serious politician.

If everything goes perfectly, you could make a nice profit. But there are risks. This is a startup in a capital-intensive industry with no track record. There will be hiccups. Delays. Disappointments. It could take years before they generate significant revenue. And even then, there’s no guarantee of success.

They’re not the only player in this game. MP Materials (MP +1.77%) has a working mine in California and is already making magnets. They’re further along in the process. They’re not without their own challenges, but they’re a more established company.

USA Rare Earth stock is a high-risk, high-reward investment. Aggressive investors who understand the risks might consider a small position. More conservative investors should probably wait for more tangible results. Or, you know, just buy a really good magnet. It’s a safer bet.

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2026-01-24 17:22