The Hidden Winner in Rare-Earth Metals: Why USA Rare Earth Could Outpace MP Materials in 2026

A Shift in Market Dynamics for Rare-Earth Stocks

MP Materials (NYSE: MP) has delivered impressive returns—surging nearly 250% since the start of 2025, dramatically outpacing the S&P 500’s 17% gain. However, the narrative around rare-earth metals investments is shifting, and opportunities may now lie elsewhere in the sector.

While geopolitical tensions continue to favor U.S.-based rare-earth producers, the most explosive growth phase for established players like MP Materials may already be factored into current valuations. For investors seeking meaningful upside in the coming 12 months, a smaller competitor presents a more compelling opportunity.

Why MP Materials’ Growth Could Stall

MP Materials’ extraordinary rally has been driven primarily by forward-looking potential rather than current operational results. The stock’s recent sideways trading reflects this reality—expectations were already priced in during the initial surge.

A critical factor: MP Materials has already secured its public-private partnership with the U.S. Department of Defense. This was the game-changing catalyst that propelled the stock’s initial explosive growth. Without a new catalyst on the horizon, further substantial gains become less likely.

The company currently trades at a forward P/E of approximately 59. Given that analyst estimates already incorporate the DoD partnership impact, shares appear to fully reflect this development. In 2026, rather than delivering another explosive rally, MP Materials may simply “grow into its valuation”—producing modest returns compared to the torrid 2025 performance.

Additionally, temporary easing of U.S.-China trade tensions has removed some near-term tailwinds. While concerns about rare-earth supply restrictions could resurface around November when the current truce expires, this provides only moderate support for existing positions.

USA Rare Earth: The Pre-Partnership Play

The story differs dramatically for USA Rare Earth (NASDAQ: USAR).

Up just 25% in 2025, USA Rare Earth has underperformed relative to MP Materials. However, this represents an untapped opportunity. As a pre-revenue company racing to scale rare-earth mining and refining operations, USA Rare Earth hasn’t yet achieved what MP Materials already has: a strategic government partnership.

The potential deal hasn’t materialized yet, but the groundwork is being laid. In October, CEO Barbara Humpton signaled active discussions with the Trump administration, sparking investor speculation about an imminent arrangement. While the timing remains uncertain, 2026 appears increasingly likely as the window for such a partnership.

The Catalysts Ahead

Why would the DoD prioritize another rare-earth partner? The answer lies in urgency. The U.S. has been fast-tracking development of non-Chinese rare-earth supply chains to reduce dependency. With China’s export restrictions set to resume around mid-2026, reducing American reliance becomes an even higher national priority.

Securing a partnership with USA Rare Earth could enable rapid scaling through equity financing and long-term purchase commitments—precisely the structure that boosted MP Materials. If such a deal materializes, historical precedent suggests substantial upside. MP Materials tripled when its DoD partnership was announced.

Valuation and Risk Considerations

USA Rare Earth currently trades at an even richer valuation than MP Materials, reflecting its status as an early-stage company without revenue. This makes it significantly riskier in absolute terms. Both stocks carry substantial volatility risk and sector-specific uncertainties.

However, from a return potential standpoint over the next 12 months, the risk-reward calculus favors USA Rare Earth. The stock trades ahead of its catalyst, meaning investors gain exposure at ground-floor levels before—not after—a potential DoD announcement.

The Bottom Line

MP Materials has already captured its transformative moment. USA Rare Earth may be positioned at the beginning of its own inflection point.

Neither investment is conservative. Both names should be regarded as volatile, speculative positions within a diversified portfolio. That said, if you’re seeking the next significant rare-earth metals opportunity rather than chasing yesterday’s winner, USA Rare Earth presents a more compelling risk-adjusted opportunity heading into 2026.

The path forward hinges on geopolitical necessity and government action—but when those factors align, rare-earth stocks have historically delivered outsized returns. USA Rare Earth may be where that next move originates.