The Trump administration announced on January 26 that the Department of Commerce would invest $1.6 billion in USA Rare Earth, taking a 10 percent equity stake in the Oklahoma-based mining company as Washington accelerates efforts to build a domestic supply chain for critical minerals that China has long controlled.

The deal marks the largest single government investment in the rare earth sector to date and comes just days after President Donald Trump claimed to have secured a framework agreement over Greenland that includes access to the island's mineral resources. Taken together, the moves signal an intensifying campaign to reduce American dependence on Chinese-processed materials that are essential to everything from smartphones to fighter jets.

"USA Rare Earth's heavy critical minerals project is essential to restoring U.S. critical mineral independence," Commerce Secretary Howard Lutnick said in a statement. "This investment ensures our supply chains are resilient and no longer reliant on foreign nations."

Shares of USA Rare Earth surged as much as 29 percent on the news before settling to close up roughly 8 percent at $26.72.

The Structure of the Deal

Under the terms of a nonbinding letter of intent, the Commerce Department will provide USA Rare Earth with a $1.3 billion senior secured loan and $277 million in federal funding through the CHIPS for America program—the same legislative vehicle Congress passed in 2022 to boost domestic semiconductor manufacturing.

In exchange, the government will receive 16.1 million shares of common stock and warrants to purchase an additional 17.6 million shares, both priced at $17.17 per share. That price represents a roughly 30 percent discount to where the stock traded before the announcement. Depending on whether the warrants are exercised, the government's stake could range from 8 to 16 percent of the company.

USA Rare Earth separately announced that it had raised $1.5 billion from private investors led by Inflection Point Acquisition Corp. III, whose chairman, Michael Blitzer, also chairs USA Rare Earth. The private funding is expected to close on January 28.

The Commerce Department conditioned its investment on USA Rare Earth raising at least $500 million from non-government sources. The company has now exceeded that threshold.

Commerce will disburse funds from 2026 through 2028 based on milestones as the company executes its business plan. Chief Financial Officer Rob Steele told investors the company needs approximately $4.1 billion total to implement its strategy; between existing cash, government financing, and the private raise, it now has roughly $3.5 billion in hand.

What USA Rare Earth Plans to Build

The capital infusion will fund two major projects: a magnet manufacturing facility in Stillwater, Oklahoma, and a rare earth mine at a deposit called Round Top in Hudspeth County, Texas.

The Stillwater plant is expected to be commissioned in the first quarter of 2026. Once operational, it will produce permanent magnets—critical components in electric vehicle motors, wind turbines, and defense systems—using rare earth feedstock. USA Rare Earth says the facility will be America's first fully integrated mine-to-magnet operation.

Commercial mining at Round Top is slated to begin in late 2028. The Texas deposit contains 15 of the 17 rare earth elements, including so-called "heavy" rare earths that are particularly valuable for defense applications and especially difficult to source outside China.

By 2030, the company expects to extract 40,000 metric tons of rare earth and critical mineral feedstock daily from the Round Top site.

"This landmark collaboration with the U.S. Government represents a transformative step in our mission to secure and grow a resilient, independent domestic rare earth value chain," CEO Barbara Humpton said.

Energy Secretary Chris Wright said the Department of Energy is also partnering with the company to help rebuild the nation's critical minerals supply chain.

Why Washington Is Buying Into Mining Companies

The Trump administration's direct investment in USA Rare Earth continues an unconventional strategy that has seen the federal government take equity positions in private companies operating in sectors deemed vital to national security.

Last July, the Pentagon invested $400 million in MP Materials, which owns the only operational rare earth mine in the United States, located in Mountain Pass, California. That deal gave the Defense Department a 15 percent stake. The government has since taken positions in Lithium Americas and Trilogy Metals, with stakes of 5 percent and 10 percent respectively.

In November, the administration partnered with rare earth startups Vulcan Elements and ReElement Technologies in a $1.4 billion deal intended to scale up access to materials and technology for high-tech goods and military equipment.

The rationale is straightforward: China processes more than 90 percent of the world's rare earths and has demonstrated a willingness to weaponize that dominance. During trade disputes last year, Beijing moved to restrict rare earth exports to the United States, exposing vulnerabilities in supply chains for industries ranging from consumer electronics to defense.

Industry analysts, lawmakers, and Pentagon officials have warned for years that American dependence on Chinese-processed critical minerals constitutes a national security risk. The list of critical minerals maintained by the U.S. Geological Survey includes 50 substances, among them 17 rare earth elements prized for their magnetic, luminescent, and electrochemical properties.

The Trump administration's tax and spending legislation includes $2 billion for the Pentagon to boost the U.S. stockpile of critical minerals and an additional $5 billion through 2029 to invest in domestic supply chains. Earlier this month, a bipartisan group of lawmakers proposed creating a new agency with $2.5 billion to spur production of rare earths and other critical minerals.

The Bigger Picture

The government's foray into equity ownership has begun attracting private capital to a sector long considered too risky and capital-intensive for traditional investors. Institutions like JPMorgan have signaled interest in supporting strategically important industries, while smaller investors have adopted a "follow the feds" approach—betting on companies that Washington has already backed or might target next.

USA Rare Earth hired Cantor Fitzgerald to assist with its private fundraising. The Wall Street firm is chaired by Brandon Lutnick, son of Commerce Secretary Howard Lutnick, though the company said Cantor played no role in advising on the government investment itself.

The deal also reflects the limits of market-based solutions to strategic vulnerabilities. Building rare earth mines and processing facilities requires billions of dollars and years of development—timelines and capital requirements that private investors have historically been reluctant to accept. Government backing changes that calculus, both by providing direct financing and by signaling political commitment to the sector's long-term viability.

Whether the strategy succeeds in breaking China's grip on critical mineral supply chains remains to be seen. Beijing has spent decades building processing capacity and expertise that cannot be replicated quickly. But the USA Rare Earth investment makes clear that Washington intends to try—and that it's willing to put taxpayer money on the line to do so.