What A U.S.-China Trade Deal Means For MP Materials Stock?
MP Materials (NYSE:MP) a rare-earth materials company, has seen its stock slide nearly 10% over the last five trading days and remains down about 30% from the highs of October 14, when China expanded restrictions on certain rare-earth exports. The decline comes amid optimism around a potential U.S.-China trade deal, with President Donald Trump and Chinese President Xi Jinping set to meet in South Korea on Thursday. Earlier this month, rare-earth stocks, including MP Materials, had surged after Beijing tightened export controls on 12 of the 17 rare-earth elements, fueling expectations of greater U.S. demand and policy support. But with diplomatic talks now underway, investor enthusiasm has reversed. So where does MP Materials stock go from here?
MP stock has jumped meaningfully recently, and we currently find it unattractive. This may feel like a caution, and there is significant risk in relying on a single stock. However, there is a huge value to the broader, diversified approach we take with the Trefis High Quality Portfolio. Separately, consider what could long-term performance for your portfolio be if you combined 10% commodities, 10% gold, and 2% crypto with equities.
Still A Highly Strategic Asset
Despite the pullback, MP Materials remains one of the most strategic players in America’s critical minerals’ effort. The company owns and operates the Mountain Pass Mine in California — the only active rare-earth mine and processing facility in the United States – and focuses on producing Neodymium-Praseodymium (NdPr), essential for high-strength magnets used in EVs, wind turbines, and defense systems. Earlier this year, the U.S. Department of Defense became MP’s largest shareholder after a $400 million equity investment to expand magnet production. MP also secured a $500 million supply deal with Apple, funding construction of its new Independence facility in Texas, which will produce finished rare-earth magnets.
In Q2 2025, MP reported record NdPr oxide output, up 119% year-over-year, with sales volumes tripling. Revenue surged 84% to $57.4 million, and management expects further production gains. Q3 earnings are expected in early November and should give investors more color on how things are scaling up. The company plans to boost magnet output to 10,000 metric tons annually by 2028, potentially lifting margins over time.
A Broader Investment Wave
China has dominated the global rare earth market, producing and processing anywhere between 70% to 90% of rare earth magnets, which are vital for many advanced technologies. On the other hand, U.S. based rare earth companies typically struggled to raise meaningful amounts of capital on account of their weak position versus China’s mineral companies, who are backed by the government and have supplied global markets with low-cost materials.
However, the rare-earth industry as a whole is undergoing a transformation. Since China began restricting exports in April – sending prices soaring and disrupting auto production – Western governments and private investors have poured billions of dollars into the sector. For example, Orion Resource Partners announced a $1.8 billion consortium, partly backed by the U.S. government, to secure supplies for the U.S. and its allies. Banking giant JPMorgan Chase said it would invest $10 billion in strategic industries tied to national security, including rare-earth companies.
Expect Policy To Favor Companies Like MP
Even if a deal with China does materialize, it’s unlikely that the U.S. will ever count China as a reliable rare earth supplier again, and it’s likely that the quest to reduce the U.S. reliance on Chinese supply will continue. The U.S. government has reportedly agreed to provide MP Materials with a price floor, protecting it against any potential price crash triggered by Chinese overproduction. This backstop reinforces MP’s role as the top player in America’s rare-earth strategy, reducing its downside risk and providing greater earnings stability even if global prices weaken.
What Are The Risks?
Even with solid fundamentals and policy support, valuation remains a concern. MP trades at about 40x forward revenue, more typical of high-growth tech companies than miners. The business remains unprofitable, posting a $53.5 million net loss year-to-date and burning through about $126 million in cash. Moreover, the sector’s growth is still in its early stages, the company could see execution challenges ahead meaning that it could take a long time before it grows into its premium valuation.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap — and has achieved returns exceeding 105% since its inception. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
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