USA Rare Earth (USAR) experienced a sharp decline on Monday, with shares falling 12.8% to close at $21.28. The stock traded nearly 18 million shares, significantly above its average volume, as investor sentiment soured on the rare-earth sector. The drop came after reports that U.S. defense contractors are lobbying to postpone a scheduled January 1 ban on Chinese-made rare-earth magnets used in military contracts.
The company, which has become a bellwether for Washington's push to build a domestic rare-earth supply chain, saw its shares open at $24.32 before hitting a low of $20.82. After-hours trading saw a slight further decline to $21.25. The broader market was mixed, with the Nasdaq falling about 0.5% while the S&P 500 remained flat.
According to a Financial Times report, defense firms are urging officials to delay the ban on Chinese rare-earth magnets, which include neodymium-iron-boron and samarium cobalt types used in everything from fighter jets to smartphones. This news dampened enthusiasm for USA Rare Earth, which is seen as a key player in the U.S. effort to reduce reliance on Chinese rare-earth processing.
USA Rare Earth reported first-quarter revenue of $5.7 million, ending the period with approximately $1.75 billion in cash. CEO Barbara Humpton described the quarter as a “period of fundamental transformation.” The company is advancing its “mine-to-magnet” strategy, with projects including the Serra Verde and Carester initiatives aimed at closing the loop on its value chain. Phase 1a of the Stillwater, Oklahoma magnet plant is expected to reach an annual capacity of 600 metric tons by the end of the fourth quarter, with Phase 1b potentially boosting total output to 1,200 metric tons by the first quarter of 2027.
During the earnings call, Humpton noted that the customer environment remains challenging. She described the situation as “dire” if China restricts material supply, and indicated that the company expects purchase orders to begin arriving in the second half of the year.
The company also announced last week that it received a $14.18 million grant from the Texas Semiconductor Innovation Fund for its Round Top Mountain heavy rare-earth project in Hudspeth County. The grant supports a plan expected to create about 260 jobs and bring over $1.4 billion in capital spending to West Texas.
Despite the volatility, analysts remain bullish. Cantor Fitzgerald raised its price target to $35 from $30, maintaining an Overweight rating. Wedbush analyst Sam Brandeis also increased his target to $35 from $29, keeping an Outperform rating.
The sell-off was not isolated to USA Rare Earth. MP Materials, another key U.S. rare-earth stock, fell 8.2% to $56.27 on Monday, tracking the broader sector weakness.
However, risks remain significant. USA Rare Earth disclosed in its quarterly filing that its Stillwater magnet plant is newly commissioned and has not yet started commercial output or sales of sintered NdFeB magnets. The Round Top project is still in the exploration phase. The company may not convert customer discussions into firm contracts, and potential U.S. government deals require full paperwork, sign-offs, and milestone achievements. The quarterly filing reported a net loss of $67.0 million, or 34 cents per share.
Monday’s move has investors weighing how much of the long-term story is already priced in versus waiting for concrete orders, final government backing, and evidence that the company can translate policy demand into actual revenue.
