USA Rare Earth stock (NASDAQ: USAR) took a sharp plunge on Wednesday, witnessing an 11% drop.
The development came amid renewed doubts over continued US government backing and ongoing volatility in the rare-earth metals market.
The sell-off was largely driven by investor concerns over recent geopolitical tensions and speculation that the Trump administration may scale back its partnership with the company.
Wednesday’s plunge came as the USA Rare Earth stock did really well in the past few sessions on the backs of rising trade tensions between the United States and China.
USA Rare Earth stock: Government support fears weigh heavily
Investors are starting to get nervous about USA Rare Earth stock’s future, mainly because there’s still no clear sign of solid government backing.
The Trump administration has been vocal about shoring up America’s rare-earth supply chain, pouring $400 million into MP Materials through the Defense Department and even floating plans for price floors, but USA Rare Earth hasn’t landed any formal deals yet.
CEO Barbara Humpton recently said that discussions with federal agencies are ongoing, but without concrete commitments, investors aren’t feeling confident.
That unease has only grown after reports of major insider selling, most notably, former insider Michael Blitzer offloading over 2 million shares.
It’s the kind of move that tends to make shareholders wonder what insiders might know that the public doesn’t.
The sell-off isn’t just about company-specific worries, as it’s also about what’s happening in the broader rare-earth market.
China’s latest export restrictions have rattled global supply chains, especially for US tech and defense manufacturers that rely on these critical minerals.
While those geopolitical moves initially boosted rare-earth prices, the optimism hasn’t lasted.
Many are now questioning whether Washington’s support will extend beyond MP Materials.
Treasury Secretary Scott Bessent’s recent promise to impose price floors could offer some relief, but for USA Rare Earth, still without official federal backing, it’s not enough to calm the nerves.
The mix of policy uncertainty, insider selling, and global trade tension is keeping pressure firmly on the stock.
Valuation & market sentiment under pressure
USA Rare Earth stock has witnessed a massive bull run this year, surging over 200% in 2025 amid peak investor enthusiasm over the company’s potential government backing and rare earth market dynamics.
Technically, the stock lies in the overbought territory with volume spikes preceding the recent plunge and technical indicators like the RSI signaling overheating.
The analysts have been warning for a while about the valuations outpacing fundamentals, with revenue remaining zero, and price targets mostly ranging between $15 and $22, far below recent trading levels near $35.
This disconnect has heightened risk perceptions as broader market volatility, rising interest rates, and sector rotations weigh on speculative stocks.
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