Trump Administration's Critical Minerals Push Reinforces USA Rare Earth's Policy Beta, But Execution Risks Loom

What happened

The Trump administration is expanding its strategic equity portfolio into critical minerals and semiconductors, as reported by CNBC, underscoring continued government focus on national security supply chains. This aligns with USA Rare Earth's recent non-binding $1.6 billion CHIPS Letter of Intent and $1.5 billion PIPE, positioning the company as a key player in U.S. rare earths independence efforts. However, DeepValue's report highlights that USAR remains pre-revenue with explicit going-concern warnings, a nine-month 2025 net loss of $270 million, and substantial dilution from equity and warrant issuances. The stock has surged 124% over the past year to $25.86, largely on policy optimism, but the CHIPS package is contingent on milestones through 2028 and lacks price floors or offtake guarantees. While the administration's move reinforces the crowded policy-beta narrative, it does not address USAR's core execution risks, including Stillwater commissioning delays and the need for definitive CHIPS agreements by late 2026.

Implication

The administration's investment focus validates the strategic importance of rare earths, potentially sustaining policy support for USAR's projects and boosting sentiment. However, this does not mitigate key risks such as the non-binding nature of the CHIPS LOI, which must be converted into definitive agreements with phased milestones to unlock funding. USAR's stock is trading at levels that price in a near-perfect outcome, leaving little room for additional upside from incremental policy news. Significant dilution from the $1.5 billion PIPE and government warrants could further pressure per-share value if execution falters or funding slips. Investors should closely monitor upcoming catalysts like Stillwater commissioning and CHIPS finalization, while considering a more attractive entry point near $18 per share where downside is better priced.

Thesis delta

The news does not materially alter the investment thesis; it reinforces existing policy tailwinds but does not change the fundamental execution and dilution risks outlined in DeepValue's report. The core view remains that USAR is a potential sell at current prices, with the bull case still dependent on flawless project delivery and CHIPS conversion, while downside risks from delays or capital needs persist.