In a significant move to secure its technological supply chains, the United States government has acquired a minority stake in Oklahoma-based USA Rare Earth through a comprehensive $1.6 billion investment package. This strategic initiative, administered through the Commerce Department’s CHIPS program, represents the latest effort to reduce American dependence on foreign-sourced critical minerals essential for advanced technologies.
The investment structure comprises $277 million in direct federal funding coupled with a $1.3 billion senior secured loan. In exchange, the Commerce Department will receive 16.1 million shares of common stock and options to purchase an additional 17.6 million shares. The announcement triggered an immediate market response, with USA Rare Earth’s shares surging over 13% in pre-market trading.
Commerce Secretary Howard Lutnick emphasized the national security implications of the investment, stating: ‘USA Rare Earth’s heavy critical minerals project is essential to restoring U.S. critical mineral independence. This investment ensures our supply chains are resilient and no longer reliant on foreign nations.’
This investment occurs against the backdrop of China’s overwhelming dominance in the critical minerals sector, where it processes more than 90% of the world’s supply. This market control has provided China with substantial leverage in ongoing trade tensions with Washington.
The Trump administration has intensified efforts to build domestic capacity for critical minerals, identifying over-reliance on foreign sources as a national security vulnerability. The initiative includes developing a mine in Texas and establishing a magnet manufacturing facility in Oklahoma—components crucial for smartphones, electric vehicles, robotics, and military equipment.
This investment represents the third major government intervention in the sector recently, following a $400 million Pentagon investment in MP Materials and a $150 million loan to the same company. Additionally, a $1.4 billion partnership with rare earth startups Vulcan Elements and ReElement Technologies was announced in November.
Legislative support continues to grow, with a bipartisan group of lawmakers proposing a new agency funded with $2.5 billion to stimulate domestic production of rare earths and other critical minerals. The administration’s tax and spending cut legislation already includes $2 billion for Pentagon stockpiling of critical minerals and $5 billion through 2029 for supply chain investments.