The Reason China Targeted MP Materials Might Shock YouVIEW IN BROWSER | FOLLOW LUKE ON 𝕏 
In October 1973, America learned an unforgettable lesson about what happens when a strategic rival controls the one input everything runs on… Arab oil producers announced an embargo on the United States, and almost overnight, the world’s most powerful economy was brought to its knees. Oil prices roughly quadrupled. Gas lines stretched for blocks. Washington imposed a national 55-mph speed limit to ration fuel. And the shock helped usher in a decade of stagflation that scarred an entire generation of investors. 
While the embargo itself lasted barely five months, the lesson would persist for 50 years. Put plainly, a critical dependency, concentrated in the hands of a rival, is a weapon waiting to be fired. I bring this up because history is rhyming right now. Except this time, the chokepoint is a handful of obscure elements at the bottom of the periodic table. And the first shots of the new embargo have already been fired. This past June, China’s Ministry of Commerce formally added several U.S. companies to its export-control and government-procurement blacklists. This was done in direct retaliation for America’s push to build a rare earth supply chain outside Beijing’s borders. It wasn’t the first warning, either. During the ’Liberation Day’ tariff standoff, China restricted rare earth exports and sent automakers and defense contractors scrambling. Tesla (TSLA) faced multi-week production delays over Chinese export licenses. Oil made the 20th-century economy move. Rare earth magnets make the 21st-century economy move. Let me show you why – and how investors can get on the right side of the divide. Rare Earth Magnets Are the Hidden Input Behind Physical AIThe AI boom is no longer just about data centers and chatbots. This technology is going physical. And physical AI runs on motors. Humanoid robots like Tesla’s Optimus are powered by a network of small electric motors in their shoulders, elbows, wrists, fingers, hips, knees, and ankles – reportedly dozens of precision motors per machine. The key ingredient inside nearly every one is a neodymium-iron-boron (NdFeB) magnet, which delivers exceptional strength in a compact, battery-friendly package. Each humanoid could contain 2 to 4 kilograms of rare earth magnets, or sometimes more than an entire EV. But robots are just the beginning. Consider how much of the modern buildout funnels through this single input:
- Tesla’s vehicles need those same magnets in the traction motors that turn electricity into forward motion.
- Orbital data centers need them in the reaction wheels that point satellites without burning fuel.
- Advanced semiconductor tools need them in the wafer-handling robotics that move silicon through fabrication.
- And virtually every guided munition, drone, and defense platform in the U.S. arsenal needs them, too.
Robots. Cars. Satellites. Chips. We’re talking about different revolutions with the same input. The analysts running the numbers see what we see: from Bloomberg to McKinsey to Goldman Sachs, forecasters expect global rare earth magnet demand to roughly triple by 2040, led overwhelmingly by robotics and EVs. So, for physical AI, more robots means more motors, more motors means more magnets, and more magnets means massive new demand for rare earth elements like neodymium, praseodymium, dysprosium, and terbium. This supply chain starts in the dirt. And that’s exactly where the problem begins.
China Controls Roughly 90% of Rare Earth Magnet ProductionWhen we first covered this story last summer, China controlled over 85% of the world’s rare earth refining and magnet production. Today, the picture is even starker. China produces the overwhelming majority of the world’s heavy rare earth elements – and roughly 90% of the finished magnets made from them. Read that again. The single input underpinning robotics, EVs, satellites, chip fabs, and modern defense systems is controlled – almost in its entirety – by America’s chief strategic rival. A rival that has now demonstrated, repeatedly, that it’s willing to weaponize that position. In 1973, at least the oil weapon was pointed at us by a coalition of nations with mixed motives and leaky discipline. This time, the chokehold belongs to one government. Washington has finally gotten the message. The U.S. is investing billions in domestic mining, refining, and magnet-making, backed by Defense Production Act funding, DOE grants, and tariff protection. And defense acquisition rules now require contractors to phase out Chinese-origin rare earth magnets by January 2027 – a hard regulatory clock forcing a large pool of manufacturers to find non-Chinese supply on a fixed timeline. Which raises the trillion-dollar question: find it where? MP Materials Is Building America’s Mine-to-Magnet AlternativeRight now, there is exactly one American company that can mine, refine, and manufacture rare earths into finished magnets at commercial scale: MP Materials (MP). MP owns Mountain Pass in California – the largest rare earth mining site in the Western Hemisphere, accounting for more than 10% of global supply. And just look at what has happened since we first profiled the company. The Pentagon’s $400 million investment turned out to be far more than a cash infusion. The U.S. government took a 15% equity stake and signed a 10-year offtake agreement for magnet materials at a guaranteed price floor of $110 per kilogram. Even if global rare earth prices crash – the kind of move China could try to engineer to undercut Western producers – MP has a decade of government-backed economics on a meaningful portion of its output. That kind of downside protection is nearly unheard of for a commodity-adjacent business. Apple, GM, and the Pentagon Are Validating the BuildoutSince then, the validation has kept stacking up. Apple (AAPL) signed a $500 million agreement to buy American-made rare earth magnets from MP, with a dedicated recycling program feeding its Fort Worth, Texas facility. General Motors (GM) has a long-standing supply agreement for EV traction motors. The company formed a joint venture with the U.S. government and Saudi Arabia’s state mining company to develop a rare earth refinery in the Kingdom – a second leg of supply outside both China and its domestic operations. Its “10X” expansion plan targets nearly 10,000 metric tons of annual magnet production by 2028, roughly a tenfold increase from a couple of years ago. And it’s commissioning heavy rare earth separation at Mountain Pass – the capability to isolate elements like dysprosium and terbium, essential for magnets that hold their strength inside a hot robot joint or satellite actuator. The business is showing it, too. First-quarter 2026 revenue jumped 49% year-over-year to $90.6 million, well ahead of Wall Street estimates, as the company’s first commercial magnet shipments began scaling. And one more telling detail: MP stock pulled back nearly 30% in July – a slide triggered when China’s Ministry of Commerce put the company on that export-control blacklist. But look at what happened next. The stock has already clawed its way back to where it traded before the news. 
Beijing considered this company important enough to sanction, yet the market read it as a risk for about five minutes. Then it recognized it for what it really was: confirmation. Why MP Materials Sits Beneath the Physical AI BuildoutHumanoid robots. Electric vehicles. Satellites and orbital data centers. Advanced chip fabs. Those are the four pillars of one man’s empire. Every one of Elon Musk’s biggest bets – Optimus, Tesla’s vehicle fleet, SpaceX’s (SPCX) orbiting constellations, and his push into chipmaking – funnels through the exact same magnet supply chain we’ve spent this whole issue dissecting. History’s most ambitious industrial plan has a single point of failure, and it’s sitting at the bottom of the periodic table. Now, one honest caveat, because we deal in facts here, not hype: no supply agreement between MP and Tesla or SpaceX has been announced. The connection is structural – shared inputs, shared strategic goals – not a signed contract. But a manufacturer as famously obsessed with controlling his own inputs as Musk, ramping Optimus toward volume production, drawing on the same domestic magnet source that Apple and GM already depend on? We wouldn’t bet against it. Either way, the takeaway is the same: whoever supplies the magnets supplies the empire. The Bottom Line: Rare Earth Stocks Are Becoming a National-Security TradeThe 1973 embargo caught America flat-footed. But the investors who understood the chokepoint before the weapon fired were able to ride the energy supercycle that followed to generational wealth. Today’s chokepoint is rare earth magnets. The weapon has already been test-fired and the regulatory clock is ticking toward January 2027. The biggest industrial buildout of our lifetimes – Musk’s included – is competing for the same limited supply. You can see the whole board before the market does. The only question is what you do with it. Rare earth magnets are just one piece of a much bigger puzzle, though. Finding the picks-and-shovels play behind the next industrial shift is exactly the kind of hunting that led me to Lumentum (LITE) last August – a stock that’s up 645% since. My colleague Louis Navellier found the same kind of setup in Nvidia (NVDA) back in July 2023. It’s up 375% since. But there are now more promising AI-and-AI-adjacent opportunities – robots, rare earths, chips, power, data centers – than any one investor could reasonably track. Between the three of us, Louis, Eric Fry, and I put out more than 200 AI recommendations over the past year alone. That’s a lot of data, but having data on face value isn’t the same as insight. So we did something about it. We just finished rebuilding our AI Revolution Portfolio from the ground up – about 20 stocks, pulled from across our combined research, each with its own recommended allocation. Since its last rebalance, the portfolio is up 58% through July 23 – more than double the Nasdaq’s 25% gain over the same stretch. It’s live now. And the clearest answer I can give you is not just which companies matter, but how much of each to own, and how the pieces fit together. Don’t wait for the gas lines to form… Watch the full AI Revolution Portfolio replay before it closes Tuesday, August 25.
Sincerely, |
