USAR Stock Surges 35 Percent in a Week After $1.6 Billion Deal
Should Investors Enter After the Run-Up?
USA Rare Earth (NASDAQ: USAR) has surged roughly 35 percent over the past week following news of a proposed $1.6 billion funding agreement with the U.S. government. The sharp move has pushed the stock into the spotlight and reignited debate over whether investors should chase the rally or wait for a pullback. While the price action has been aggressive, the underlying story goes far beyond short-term momentum.
At its core, this move reflects a reassessment of USA Rare Earth’s strategic importance as the United States accelerates efforts to secure domestic supply chains for critical minerals.
What the $1.6 Billion Deal Actually Represents
On January 26, 2026, USA Rare Earth announced a non-binding letter of intent with the U.S. Department of Commerce under the CHIPS and Science Act. The agreement outlines access to up to $1.6 billion in funding, including approximately $277 million in direct federal support and a $1.3 billion senior secured loan. In return, the U.S. government would receive an equity stake through common shares and warrants.
In parallel with the federal backing, the company also announced roughly $1.5 billion in private investment. Combined, the total capital associated with the announcement reaches approximately $3.1 billion. The funding is intended to accelerate development of USA Rare Earth’s vertically integrated strategy, spanning mining at its Round Top project in Texas through processing and magnet production.
It is important to note that the federal funding remains a letter of intent and is subject to final documentation, approvals, and milestone requirements.
Why the Stock Has Rallied So Sharply
The 35 percent move over the past week is not just a reaction to fresh capital. It reflects a broader repricing of USA Rare Earth’s role within U.S. industrial policy. Rare earth elements are critical inputs for electric vehicles, defense systems, semiconductors, and advanced electronics. China continues to dominate global processing capacity, making domestic production a strategic priority.
By committing funding and taking an equity stake, the U.S. government is effectively signaling that USA Rare Earth is a strategic asset rather than a purely speculative mining venture. For investors, that endorsement reduces perceived political and financing risk, which often justifies a higher valuation multiple.
The deal also materially strengthens the company’s balance sheet outlook. Rare earth projects are capital intensive and historically vulnerable to funding gaps. With government and private capital combined, USA Rare Earth now has a longer runway to advance its projects without immediate dependence on volatile equity markets.
The Bull Case for Entering After a 35 Percent Move
For investors still considering entry, the bullish argument rests on long-term positioning rather than recent price action. Government support for critical minerals is part of a structural shift in U.S. policy, not a one-off catalyst. Companies aligned with that strategy may benefit for years rather than months.
USA Rare Earth’s focus on heavy rare earths and magnet manufacturing places it higher in the value chain than many peers. These products are essential to fast-growing sectors such as electric vehicles, renewable energy, aerospace, and defense. If execution is successful, the company could become one of the few vertically integrated rare earth suppliers outside China.
The scale of the financing also reduces existential risk. While it does not eliminate operational challenges, it significantly lowers the probability that the company fails due to lack of capital. For long-term investors, that shift alone can justify reassessing the stock even after a large move.
The Risks That Come With Chasing the Rally
Despite the strong momentum, entering after a 35 percent weekly gain carries real risk. The most immediate concern is that the government deal is not yet finalized. Any delays, changes in terms, or regulatory hurdles could trigger sharp volatility.
USA Rare Earth also remains pre-revenue, with commercial production still years away. The current valuation reflects expectations of future success rather than existing cash flow. That makes the stock highly sensitive to sentiment and broader market conditions.
Dilution is another factor investors must weigh carefully. The issuance of shares and warrants to the government, along with the private investment round, will increase the total share count. Additional capital may still be required in the future, which could further dilute existing shareholders.
Finally, rare earth stocks remain exposed to geopolitical and macroeconomic shifts. While policy support is a tailwind today, changes in political priorities or risk appetite can quickly reverse sentiment.
Should You Buy USAR Now?
Whether entering at current levels makes sense depends on investment horizon and risk tolerance. Short-term traders may find that much of the initial excitement is already priced in, increasing the likelihood of consolidation or pullbacks. Long-term investors, however, may view the recent rally as the beginning of a broader revaluation tied to strategic importance rather than a peak.
A disciplined approach may be more appropriate than aggressive buying. Gradual position building, clear downside risk management, and realistic expectations about timelines are essential. USA Rare Earth is still a multi-year story, not an immediate earnings play.
Conclusion
USA Rare Earth’s 35 percent rally over the past week reflects a meaningful shift in how the market views the company. The proposed $1.6 billion deal signals strong government backing and positions USAR as a key player in America’s push to secure critical mineral supply chains.
That said, the stock’s upside now depends on execution, deal finalization, and the company’s ability to translate strategic relevance into commercial success. Entering after such a sharp move is not without risk, but for investors with a long-term perspective, the story may still be in its early stages.
Financial disclaimer
This article is for informational and educational purposes only and does not constitute financial or investment advice. Investing in oil stocks involves risk, including geopolitical, regulatory, and market volatility. Always conduct your own research or consult a qualified financial professional before making investment decisions.