Investing in Lithium Stocks

Lithium, the elemental metal, is a much-discussed commodity these days. It's used to manufacture batteries, notably for electric vehicles (EVs), so many investors feel optimistic about companies that produce and refine the basic material.

However, anyone investing in the sector should prepare for a wild ride. The price of lithium carbonate (used in batteries) rocketed almost sevenfold from the summer of 2021 to the fall of 2022, only to fall back down to 2021 levels in early 2025.

Automakers and battery manufacturers accelerated investment in EVs during the COVID-19 pandemic but then pulled back as relatively high interest rates constrained auto sales, including EVs. The resulting oversupply of lithium caused the lithium price to fall through 2023 and into 2025.

Even with the oversupply, soaring battery demand from EVs and energy storage (saving power for later distribution to the electric grid) have some investors anticipating a solid recovery in lithium demand in the next few years.

In the U.S., the 2021 Infrastructure Investment and Jobs Act, a significant step towards a greener future, allocated $5 billion in federal funding for EV charging stations. Also, the 2022 Inflation Reduction Act was passed to provide credits for consumers, further supporting former President Joe Biden's ambitious goal of EVs accounting for 50 percent or more of new auto sales by 2030. With such strong government support and automakers aligning their strategies, the future demand for lithium looks promising.

That said, automakers have pared back EV investment plans, and the rate of growth of EV adoption has slowed compared to previous estimates.

Here's what you need to know before considering an investment in this essential material used in battery development.

Four leading lithium stocks

Four leading lithium stocks to consider in 2025

Like any basic materials and metals investment, betting on lithium isn't for the faint of heart. Soaring demand for a material used in manufacturing doesn't automatically equate to higher sales and profits for a company. Supply also plays a hand in the market price of the basic material, so when supply outpaces demand, prices fall -- and the material producer's sales can fall, too, even if demand is expanding.

As with all mining operations, establishing new lithium projects can be a substantial financial commitment. It often takes several years to reach full production, which can strain a mining company's financial resources. However, the long-term potential of these projects can be a significant draw for investors.

While the long-term outlook is positive, the near term contains many challenges. Growing production in Chile and Argentina is creating a supply glut, while automakers' demand for lithium carbonate remains relatively weak.

Top lithium stocks for 2025

Here are four leading lithium producers in the lithium market:

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1. Sociedad Quimica y Minera de Chile

As one of South America's top basic materials and chemical companies, Sociedad Quimica y Minera (SQM) is one of the world's largest producers of lithium used in batteries and other energy storage technologies.

Its two major shareholders are Chile's Pampa Group (a mining company), owning 26%, and China's Tianqi (an EV battery metal processor), owning 22%.

The company is currently highly reliant on Chilean resources, and it remains to be seen how state control of lithium will affect SQM's ability to generate a profit.

SQM predicts demand for lithium will outpace supply over the long term, so it has been investing to increase its production capacity. With recent improvements now complete, the company claims it will be able to increase its market share in supplying lithium, mainly for EV batteries. However, its outlook for 2025 includes an expectation that excess battery material capacity will continue through the year.

2. Albemarle

Mining and chemical producer Albemarle is leading the charge in global lithium output. Among the company's biggest customers is Panasonic (OTC:PCRFY), which manufactures lithium batteries for everything from small consumer electronics to EVs. Samsung (SSNL.F 9.01%) and Corning (GLW 0.0%) are also significant customers.

Although lithium prices can be volatile and will ultimately guide the direction of Albemarle's sales, the company has proven itself over the years to be a durable mining operation that can bring lithium to market.

The company swung to a net loss of $1.2 billion in 2024 due to the collapse in lithium prices, and management is reacting by cutting capital expenditures and other costs to solidify its balance sheet while waiting for an upturn in the lithium market.

It's an excellent place to start if you are looking for exposure to the upside potential of the price of lithium carbonate, but investors will need to be patient and have the stomach to tolerate bad news in the short term.

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3. Ganfeng Lithium

On the other side of the Pacific, Ganfeng Lithium is China's largest producer of base materials for lithium battery manufacturing. Given the sheer size of China's population (1.4 billion) and the rapid rise in EV sales, Ganfeng is well positioned as a top supplier to EV manufacturers based in China and manufacturers based elsewhere, such as Tesla (TSLA -5.03%) and BMW (BMW 4.56%).  

The company is well capitalized with cash and manageable debt, and it has generated healthy profit margins. With China now dominating the EV market, the company has a bright future.

4. Lithium Americas 

Legacy automakers have big plans to electrify their vehicle lineups in the coming years, which means millions of new EVs could be sold. The potential trend has led to a big jump in smaller, more speculative lithium stocks such as Canada-based Lithium Americas.

Lithium Americas currently doesn't generate any revenue. The value of the company lies in its joint venture with General Motors (GM 5.63%) to fund, develop, construct, and operate a commercial mine and chemical manufacturing operation in Thacker Pass, Nevada.

The company expects to complete Phase 1 of the project in late 2027, with an expectation of producing 40,000 tonnes per year of battery-grade lithium. As such, investors are hoping demand will pick up in time for the start of the project. Lithium Americas is a highly speculative stock that will attract enterprising investors, but most investors will want to tread lightly with these speculative bets.

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Staying diversified

Staying diversified

To help lessen wild swings in value, consider buying a lithium ETF such as the Global X Lithium & Battery Tech ETF (LIT 0.0%) or invest in a basket of lithium stocks such as the ones listed above. Given the ups and downs in lithium production, keep any investment in this niche of the mining and chemicals industry small and stay focused on the long term.

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