Rare Earth Stocks Drop Tuesday as AI Fears Grow: USA Rare Earth and MP Materials Slide

Rare earth miners slid into Tuesday’s close as investors dump AI-adjacent trades. MP Materials (NYSE:MP) is down 3% to $57, while USA Rare Earth (NASDAQ:USAR) is off 4% to $19 in late-afternoon trading.

AI Capex Anxiety Hits Supply Chain Names

There is no company-specific catalyst for either name today. The move is sector-wide, driven by a sharp reset in AI spending expectations. Anthropic told investors over the weekend that its annualized revenue run rate reached $65 billion at the end of July, a large number but below the $80 billion figure circulating in Silicon Valley. Reuters also reported Anthropic’s internal 2028 revenue estimate of $190 billion to $200 billion, which trails aggressive buy-side models.

The Wall Street Journal added fuel, flagging roughly $3 trillion of off-balance-sheet AI commitments across nine top tech names, dwarfing the roughly $600 billion of traditional capex disclosed over the past year. Meanwhile, the 30-year Treasury yield hit a 19-year high, pressuring capital-intensive projects such as mine and magnet plant buildouts.

MP Materials: Momentum Cools After a Strong Run

[chart:MP]

MP is caught in the semiconductor selloff by association. The iShares Semiconductor ETF (NASDAQ:SOXX) is down 5% today, while the iShares Expanded Tech-Software ETF (NASDAQ:IGV) is essentially flat. The pain sits with hardware and capex-linked equities.

Context matters. MP is still up 29% over the past month and 16% year to date, though it remains 22% lower over the trailing year. The Q2 report on August 6 (see SEC filings) showed revenue of $108 million, up 89% year over year, with NdPr oxide and metal sales climbing 277%. The Department of War partnership carries a $110/kg NdPr price protection agreement, an industrial policy backstop that pure AI hardware plays do not have.

Analyst targets sit at $75 today, still healthily above where MP Material shares trade.

USA Rare Earth: Higher Beta Feels the Squeeze

[chart:USAR]

USAR trades with a beta of 2.58, and days like today expose that. The stock is still up 23% over the past month and 62% year to date. Cash sits at $1.53 billion after the $1.5 billion PIPE, with up to $1.6 billion of CHIPS Act funding and the pending $2.8 billion Serra Verde acquisition closing at the end of August.

Q2 revenue of $5.8 million missed consensus, but the story here is capacity build-out. Analysts remain bullish with an average $37 price target, implying roughly 100% upside from where shares trade today. Revenue is expected to scale from $73 million in 2026 to $1.5 billion in 2028.

Selloff Spreads From Chips to Supply Chain

When AI capex assumptions get marked down, everything downstream of hyperscaler spending trades softer, including the specialty magnets that feed data center power equipment, robotics, and drones (we profiled seven non-chip suppliers riding this same buildout in a free report here: 7 Stocks Powering the AI Boom). That said, the declines here are meaningfully smaller than in semiconductor equities, which is itself the tell. Government offtake agreements, defense contracts, and floor-price mechanisms give rare earth names a policy cushion that speculative AI hardware plays lack.

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