Crunch time for rare stocks?
- US “rare earths” stocks down sharply in recent weeks
- The industry is a key part of US-China trade talks
- Domestic industry tied to longer-term US strategic interests
Anyone looking for a visual representation of sentiment surrounding US-China trade negotiations need only glance at the price charts of a select group of US stocks.
The companies in question are involved in the mining and processing of “rare earths,” a group of 17 obscure elements, some of which are essential for modern electronics, including the production of magnets used in computer hard drives and smartphones, as well as electric motors and various clean-energy technologies.
China has long dominated rare earths production, a reality that initially boosted the stocks of US companies in the industry when the White House made rare earths a focal point of trade negotiations in April. More recently, the Trump administration’s proposed 100% tariff on China (because of its rare earths export restrictions) was followed by surges in some US-based rare earths stocks, including USA Rare Earth (USAR), which jumped a total of 24.5% on October 10 and 13:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
That rally ended almost as soon as it began, however, as President Trump announced, “Don’t worry about China, it will all be fine” within 48 hours of the tariff proposal. Subsequent reassurances about a trade deal over the next two weeks left USAR nearly 48% below its October 13 close by Wednesday—back to where it was on October 2, when reports that the White House was looking to partner with USAR kicked off the stock’s eight-day, 110% rally.
Another US rare earths stock, MP Materials (MP), made a similar move, rallying to record highs on October 13-14 before retreating more than 33% (as of Wednesday) to test its early September lows:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
The most obvious lesson from both these charts is that progress and setbacks in US-China trade relations—which may or may not be satisfactorily resolved by today’s scheduled meeting between President Trump and Chinese President Xi Jinping—could continue to trigger significant moves in stocks like MP and USAR.
Morgan Stanley & Co. analysts recently argued that “tactical escalation with an off-ramp” is the most likely near-term scenario. With both the US and China preferring the existing equilibrium—i.e., the US receives China's rare earths, China receives US semiconductors—the two countries will reach a workable agreement.1
But an agreement wouldn’t necessarily mean the US is going to abandon efforts to bolster its domestic rare earths industry. “Powering AI + Critical Materials: Potential Emerging Trends and Catalysts” explores the linkages between rare earths, US energy policy, and the need to power AI datacenters.
Market Mover Update: Bloom Energy (BE) highlighted another part of the AI/energy story on Wednesday. The company, which specializes in fuel-cell tech to derive energy from natural gas, among other sources, rallied 18% after beating earnings estimates. Morgan Stanley & Co. recently cited BE as a possible key player in the race to supply energy to AI datacenters.2
Today’s numbers include (all times ET): EIA Natural Gas Report (10:30 a.m.).
Today’s earnings include: Advance Auto Parts (AAP), Apple (AAPL), Amazon (AMZN), Baxter (BAX), Bristol Myers Squibb (BMY), BP (BP), Coinbase (COIN), Estee Lauder (EL), First Solar (FSLR), Gilead Sciences (GILD), Hershey (HSY), Kimberly Clark (KMB), LKQ (LKQ), Eli Lilly (LLY), Mastercard (MA), Merck (MRK), PriceSmart (PSMT), Roblox (RBLX), Reddit (RDDT), Vulcan Materials (VMC), Wayfair (W).
Click here to log on to your account or learn more about E*TRADE's trading platforms, or follow the Company on Twitter, @ETRADE, for useful trading and investing insights.
1 MorganStanley.com. China’s Rare Earth Gambit. 10/16/25.
2 MorganStanley.com. Powering AI: Capitalizing on Market Weakness. 10/23/25.