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USAR Stock Rally: Federal Backing Could Boost Rare Earth Supply Chain
USA Rare Earth Inc. (NASDAQ: USAR) saw its stock soar by more than 20% in early Friday trading after Chief Executive Barbara Humpton revealed that the company is in “close communication” with the Trump administration.
The rare earth miner, headquartered in Oklahoma, is working to establish a domestic supply chain for critical minerals. Investors interpreted Humpton’s comments as a strong sign that the firm could be next in line for federal equity investment.
Following the sharp rally, USAR stock is now trading at nearly five times the level it reached in the final week of March, marking one of the steepest upward moves in the sector this quarter.
The Potential Impact of Federal Backing
A possible federal stake in USA Rare Earth would go far beyond financial capital. It would also highlight the company’s strategic role in bolstering U.S. supply chain resilience and strengthening national security.
Humpton’s remarks come after the Trump administration invested $400 million in MP Materials Corp earlier this year. That move set a precedent for Washington’s interest in building domestic rare earth capacity. “This is a field where it will not be a zero-sum game,” Humpton told The Fly, suggesting that collaboration, not competition, will drive growth in the sector.
For investors, her comments underscored a potential turning point. Federal support could accelerate USA Rare Earth’s development of its Oklahoma magnet production facility, which is seen as vital to reducing dependence on foreign imports of rare earth elements.
The Challenges Behind the Rally
Despite the excitement, USA Rare Earth is still a pre-revenue company. Its operations remain untested at a commercial scale, and the Oklahoma facility is still under development. This raises questions about whether the company can deliver on its ambitious goals in the near term.
Moreover, the recent stock rally appears to be fueled more by speculation than by fundamentals. While government interest is significant, there is no guarantee that talks will result in an investment. Even if a deal is secured, the structure may not meet investor expectations. Recent agreements in the sector, such as the Lithium Americas deal, have sparked concerns around dilution and control.
These uncertainties place USA Rare Earth in a high-risk category, where optimism must be balanced with caution.
Wall Street’s Perspective
Analysts on Wall Street have taken note of the rapid rise in USAR shares. While the stock currently carries a consensus rating of “buy,” the average target price of around $19 suggests a potential decline of up to 30% from current levels.
This highlights the divergence between short-term market enthusiasm and longer-term valuation models. Analysts stress that without revenue, proven production capacity, or firm federal commitments, the company’s valuation rests heavily on expectations rather than tangible performance.
A Strategic But Speculative Story
The rare earth sector has gained increasing attention as the United States looks to secure critical mineral supplies and lessen reliance on overseas producers, particularly China. In this context, USA Rare Earth has positioned itself as a potential key player.
The company’s emphasis on domestic magnet production aligns with Washington’s broader industrial strategy. However, the gap between vision and execution remains wide. For now, USA Rare Earth is navigating a speculative phase, where market sentiment and political signals weigh more heavily than operational results.
What Comes Next
Much of the future for USA Rare Earth will depend on the outcome of its discussions with the Trump administration and its progress in bringing the Oklahoma facility online. Any confirmation of federal involvement could reshape the company’s trajectory, but the timing and structure of such a deal remain uncertain.
As Barbara Humpton emphasized, the rare earth industry is not a “zero-sum game,” hinting at the potential for multiple U.S. players to thrive in the sector. Still, questions around execution, financing, and scale will define how much momentum USA Rare Earth can sustain beyond its recent rally.
