These Critical Mineral Stocks Could See AI-Style Momentum

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• China’s dominance in critical mineral refining is becoming an increasingly important geopolitical and economic risk.
• Market capitalizations across the sector could create unusual opportunities.
• The PRIME framework has identified increasing probabilities of base breakout moves in several stocks in the industry.

Critical Minerals Are Strategic Infrastructure

Critical minerals are to the digital economy what crude oil was to the industrial economy: a foundational input that quietly powers nearly every strategically important industry.

Artificial intelligence infrastructure, semiconductors, robotics, aerospace, defense systems, electrical grids, battery storage, telecommunications equipment, drones, and next-generation manufacturing all depend on reliable access to critical minerals and rare earth elements.

The national security implications are equally significant.

Rare earth magnets are essential for fighter jets, missile guidance systems, radar, satellites, submarines, advanced communications systems, and AI-related compute infrastructure. In many cases, economically viable substitutes are limited or nonexistent.

As a result, critical minerals are no longer just commodities. They are strategic assets tied directly to technological leadership, economic strength, and military dominance.

The Real Bottleneck Is Refining — Not Discovery

Despite the name, rare earth elements are not especially rare geologically.

The real challenge lies in the ability to extract, separate, refine, and manufacture usable materials economically and at scale.

That process is difficult, capital intensive, environmentally sensitive, and technologically complex.

As a result, China currently:

• Mines roughly 70% of the world’s rare earth elements
• Controls approximately 85% of global refining capacity
• Manufactures nearly 90% of rare earth magnets

That concentration creates a significant strategic vulnerability for the United States and its allies.

The market received a reminder of that risk in 2025 when China imposed new export restrictions on several rare-earth materials and related technologies following rising geopolitical tensions with the United States.

The strategic vulnerability created by concentrated critical mineral supply chains may eventually resemble the geopolitical leverage historically associated with global oil chokepoints.

Investors are beginning to recognize that securing domestic supply chains may become a national priority rather than simply an industrial policy objective.

Why The Market Opportunity Could Become Much Larger Than Investors Expect

One of the most interesting aspects of this theme is the mismatch between the industry's strategic importance and the current size of the U.S. companies involved.

Many of the companies attempting to build U.S.-aligned critical mineral supply chains remain relatively small, unprofitable, and early in their development cycles.

MP Materials (MP), currently the largest U.S.-based company in the group, has a market capitalization of roughly $12 billion despite operating in an industry tied directly to AI infrastructure and defense systems, where backlogs and budgets that rely on critical minerals are measured in trillions of dollars.

Collectively, several of the major U.S.-related companies tied to the sector represent only about $36 billion in combined market capitalization.

 

That is remarkably small relative to:

• projected AI infrastructure spending,
• semiconductor investment,
• defense modernization,
• and energy transition capital expenditures.

Recent earnings commentary across the technology sector has highlighted enormous projected spending, with backlogs estimated to be over $2 trillion.

It has been estimated that 20 – 50% of the $1.5 trillion defense budget relies on critical minerals as an input.

If investors begin treating critical mineral supply chains as strategic infrastructure rather than speculative commodity businesses, valuation expectations across the group could be rerated.

This potential “expected growth story” appears to be underappreciated by the market.

Why Technicals Suddenly Matter

Many of these companies still have weak earnings profiles, small revenues, and elevated execution risk. That makes technical confirmation particularly important.

Weak fundamentals combined with weak technicals can create substantial downside risk.

However, when market narratives shift, capital flows improve, and technical conditions begin confirming institutional participation, small industries can experience extremely powerful momentum-driven repricing cycles.

Using MarketGauge’s PRIME framework, several stocks in the group are approaching important technical inflection points with improving alignment across price structure, relative strength, institutional accumulation, and momentum.

In particular, several charts are beginning to show:

• Mature consolidation bases
• Improving momentum trends
• Constructive accumulation patterns
• Strong relative performance during the recent market rally

USA Rare Earth (USAR) currently shows one of the stronger technical configurations in the group, with improving alignment across multiple PRIME factors right below an important breakout level.

MP Materials (MP) remains one of the most strategically important names in the sector. While its shorter-term technical readings have weakened somewhat recently, the longer-term trend structure remains constructive. A successful move through the $73 resistance area could attract renewed institutional participation and potentially signal the next phase of the trend higher.

The Bigger Picture

The AI revolution, rising geopolitical tensions, and increasingly fragmented global trade relationships are accelerating demand, while China maintains an uncomfortable level of control over the extraction, refining, and production of critical minerals necessary for AI infrastructure, defense systems, semiconductors, and advanced manufacturing.

At the same time, U.S. companies attempting to reduce that dependence remain relatively small compared to the scale of the potential demand opportunity in front of them.

That combination can create the conditions for unusually powerful long-term trends:

• small market capitalizations,
• strategic national importance,
• rising geopolitical urgency,
• accelerating industrial demand,
• and improving institutional participation.

The market may still be underestimating how important critical minerals could become in the near and long term, and several charts suggest investors are beginning to notice.

If You’d Like To Learn More About MarketGauge Strategies and Systems

If you'd like access to the MarketGauge indicators, strategies, automated trading models, and more, contact us.

• For individual traders or those who want access to professional-grade models: marketgauge.com/call, and ask Rob how to join our Active Investing Edge program
• If you’re an asset manager or RIA seeking algorithmic systems: email Ben at [email protected]
• Use Big View (a lot of it is free!)

Best wishes for your trading,

Geoff Bysshe
Co-Founder
(Connect on LinkedIn)

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Every week we review the big picture of the market's technical condition as seen through the lens of our Big View data charts. The bullets provide a quick summary organized by conditions we see as being risk-on, risk-off, or neutral.  The video analysis dives deeper.

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Summary:  Markets continued to grind higher this week with the SPY, QQQ, and IWM all pushing to new all-time highs on strong earnings, broad risk-on participation, and subdued volatility, though the Nasdaq is becoming short-term overbought and internals have begun to weaken slightly beneath the surface. Leadership remains concentrated in technology and semiconductors while global equities, growth stocks, and most “Modern Family” sectors stay firmly in bullish phases, although elevated rates, geopolitical risks, and softer breadth suggest the market could be vulnerable to short-term consolidation despite the still-positive intermediate trend.

Risk On

• Markets continued higher this week, with SPY, QQQ, and IWM putting in new all-time highs as the markets responded favorably to earnings and shrugged off continued geopolitical uncertainty. Nasdaq is overbought on price and real motion. (+)
• Sectors were mostly positive on the week, dominated by monster performances in Semiconductors and technology. (+)
• The new high new low ratio remains strong overall but weakening over the last couple days. (+)
• The color charts (moving average of stocks above key moving averages) show risk-on readings, strongest in QQQ and IWM, with SPY lagging a bit behind. (+)
• Risk gauges remain quite strong with 4 of the 5 ratios risk-on with the wood/lumbar ratio being the only hold-out . (+)
• Volatility remained around its lowest levels since February and below its 200-Day Moving Average. (+)
• Growth put in new all-time high while value is also strong in a bull phase and momentum favoring a continued move higher. (+)
• The modern family looks bullish overall with 5 of the six in bull phases, though aside from technology, the members did not make a lot of progress on the week. (+)
• Emerging and developed foreign equities are all in bull phases with emerging markets putting in a new all-time high close on Friday. (+)
• Seasonal trends cool from earlier in the year but remain bullish for the next couple of months. (+)

Neutral

• Volume was fairly evenly distributed among accumulation days and distribution days. (=)
• The market internals remain fairly neutral even as the indexes pushed to new highs.. (=) 
• Soft commodity prices are trending higher overall, though they didn’t move significantly on the week. (=)
• Rates remained near their recent highs. (=)

Risk-off

• Oil came off its recent highs, but remains elevated overall and geopolitical uncertainty in the Middle East is a major factor. (-)

 

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Actionable Trading Plan

The market remains in a strong risk-on environment, so the primary strategy is to stay net long and continue leaning into leadership areas like semiconductors, technology, growth, and small caps while avoiding the temptation to aggressively hedge simply because the indexes are extended. However, with QQQ now overbought on both price and real motion, breadth weakening slightly, and volume no longer overwhelmingly supportive, this is a good time to tighten stops, scale into positions on pullbacks rather than chasing breakouts, and raise some tactical cash into sharp upside extensions.

Tactical Positioning

• Maintain overweight exposure to:
  • Semiconductors (SMH)
  • Technology/growth leadership (QQQ)
  • Small caps improving in bull phases (IWM)
  • Emerging markets showing relative strength
• Keep exposure lighter in:
  • Rate-sensitive areas
  • Energy until oil/geopolitical direction becomes clearer
  • Defensive sectors unless volatility begins expanding

Entry Strategy

• Buy pullbacks into:
  • Rising 10-day or 20-day moving averages
  • Prior breakout levels
  • Short-term volatility spikes while VIX remains below its 200-day moving average
• Avoid initiating oversized positions after extended multi-day runs, especially in Nasdaq leadership names already stretched above upper Bollinger Bands.

Risk Management

• Tighten trailing stops on extended winners, especially high-beta tech positions.
• Reduce position size slightly if:
  • New high/new low ratio continues deteriorating
  • Market internals fail to confirm new highs
  • VIX reclaims its 200-day moving average
• Keep an eye on rates and oil:
  • Rising yields could pressure growth temporarily
  • A renewed oil spike tied to Middle East developments could rotate leadership away from tech

What Would Confirm Further Upside

• Broader participation from SPY and cyclical sectors
• Improvement in accumulation volume
• Internals reaccelerating alongside price
• Continued strength in growth over value without defensive rotation

What Would Trigger Defensive Action

• QQQ losing short-term support on heavy volume
• Expansion in distribution days
• New lows expanding while indexes remain near highs
• Volatility breaking higher alongside weakening breadth

For now, the tape still favors buying dips over selling strength, but the market is transitioning from an “easy broad thrust” environment into a more selective momentum phase where execution and risk control matter more.

 

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**There will not be a video this week