USA Rare Earth (USAR 5.93%) stock is seeing explosive gains in Monday's trading. The seabed mining company's share price was up 12.8% as of 2:45 p.m. ET and had been up as much as 14% earlier in the session.
USA Rare Earth's valuation is surging today following U.S. military actions conducted in Venezuela over the weekend. U.S. military forces seized Nicolás Maduro and brought him to the U.S. to face criminal charges, and some investors are betting that the development could be a beneficial one for the mining specialist.
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Is USA Rare Earth stock a buy right now?
While much of the discussion surrounding the U.S.'s actions in Venezuela has centered around short-term and long-term impacts on the oil market, the removal of Maduro from power will likely also have great significance for the rare-earth minerals market. Venezuela has substantial mineral resources, and closer relations with the U.S. following Maduro's removal could wind up creating significant opportunities for USA Rare Earth.
NASDAQ: USAR
Key Data Points
Roughly 90% of the world's rare earth minerals are currently sourced through China. As the U.S.'s relations with the country have become increasingly adversarial, mineral sourcing has become a crucial economic and national-security concern. Rare earth minerals are key resources for defense technologies and chips used for artificial intelligence (AI), and relying on a geopolitical adversary for access represents a major strategic concern for the U.S.
USA Rare Earth stock is a high-risk, high-reward play, but it also comes with some defensive characteristics. If relations between the U.S. and China continue to sour, the importance of securing critical minerals will increase dramatically. I think there's a fair chance that such a scenario will play out through the remainder of the decade and believe that it's a potential outcome that investors can't afford to ignore. That doesn't necessarily mean the stock will go on to be a huge winner, but the risk-reward profile looks appealing for investors who believe alternative sourcing of rare earths will become increasingly important.
