Could Buying These 3 Rare Earth Stocks Make You Rich?

Rare-earth metals are in high demand. The supply of these metals, however, is constrained. And that supply is largely controlled by a single country, China. There is a huge opportunity for companies like TMC The Metals Company (NASDAQ: TMC), USA Rare Earth (NASDAQ: USAR), and MP Materials (NYSE: MP) to build rare-earth metals businesses.

Here's why these companies could create material wealth for investors. And why the risk profiles are vastly different between each of these rare-earth metals stocks.

The size of the rare-earth problem

The problem in the rare-earth metals market is highlighted by an event that took place in 2010. That year, China's decision to limit rare-earth metal exports led to a 10x increase in their prices in Japan. Notably, rare-earth metals are used in products ranging from cellphones to missile defense systems. So they are vital to modern technology and to a country's self-defense. With China clearly willing to use rare-earth metals as a geopolitical bargaining chip and the impact they can have on prices, countries are keen to find alternative supply sources.

China is not the only issue. Rare-earth metals are also used in the construction of solar and wind power projects. Electricity demand is expected to increase 60% between 2025 and 2045. New technologies like artificial intelligence (AI), which is particularly power hungry, and electric vehicles are going to be important drivers of electricity demand. Renewable power is going to be a big part of the growth story, which means rare-earth metals are also important for the power grid. All in, the International Energy Agency (IEA) expects demand for rare-earth metals to increase by 50% to 60% by 2040.

There is no easy solution, and a huge opportunity

The bad news is that building a mining business is difficult and costly. The good news is that there are two sources of opportunity: supply diversification away from China and meeting expected demand. Companies like The Metals Company, USA Rare Earth, and MP Materials are building businesses to capitalize on both rare-earth metals opportunities, giving investors a chance to jump aboard. All three could be big winners, but they have very different risk profiles.

The Metals Company is the riskiest of the three, but it could have the most long-term opportunity. The company is attempting to build an undersea mining operation. It is nowhere near that goal, but the U.S. government is changing regulations to accelerate the company's progress. However, the company is losing money and will continue to do so for the foreseeable future until it actually produces rare-earth metals. Only the most aggressive investors should consider buying it.

USA Rare Earth is also losing money, but it has used acquisitions to quickly build a rare-earth metals processing business. Unlike The Metals Company, USA Rare Earth generates revenues. The next big step is for the company to build a rare-earth metals mine, which is the plan. The U.S. government is also involved here, providing funding for the company's development. The only problem is that the proposed mine isn't expected to produce rare-earth metals until 2028.

That said, USA Rare Earth has inked a deal to buy a Brazilian rare-earth metal mine that is already producing material, with the deal expected to close in the back half of 2026. So the company is on the verge of having a complete end-to-end rare-earth metals business. But investors need to appreciate the aggressive acquisition-driven approach before buying into this rare-earth stock.

MP Materials has also received funding from the U.S. government. However, it is differentiated in two ways from the other rare-earth stocks here. First, the company operates a mine that produces rare-earth metals and processing facilities. It already has the complete package. Second, on an adjusted basis, the company is generating positive earnings. It is still early in the company's development, but MP Materials is the furthest along in the start-up process.

Big opportunities and big risks

Could investors get rich by investing in The Metals Company, USA Rare Earth, and MP Materials? The story is very strong, from supply concentration risks to demand for these vital materials. But these are still start-up businesses, and only one is making a profit on an adjusted basis. Only the most aggressive investors should consider these stocks. And even then, you might want to tread with caution, sticking to USA Rare Earth and MP Materials, which are both far more developed businesses.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends MP Materials. The Motley Fool has a disclosure policy.