Nick Hodge,
Publisher
Sept. 23, 2025
The headlines out of Beijing this week should send a chill down the spine of every investor who cares about national security — or their portfolio.
A U.S. congressional delegation just returned from China. Their verdict? The rare earth dispute remains unresolved.
That’s diplomatic speak for: America still doesn’t have reliable access to the materials that make modern life possible.
Rare earth elements are the backbone of 21st-century technology. They make the strongest permanent magnets on Earth — neodymium-iron-boron (NdFeB) magnets.
These tiny components unlock the performance of everything from electric vehicles to drones, wind turbines, and advanced missile systems.
- A Tesla motor can’t run without them.
- A Predator drone can’t fly without them.
- An F-35 fighter can’t maneuver without them.
And right now, China controls 90% of global supply.
Beijing knows it, too. It has already used this leverage as a pressure point in trade disputes.
When the Trump administration escalated tariffs earlier this year, rare earth shipments were one of the first cards China hinted it could play.
This isn’t just about gadgets and green energy. It’s about national security. As Representative Adam Smith, the top Democrat on the House Armed Services Committee, admitted: “I don’t think we resolved the rare earth question.”
A Demand Wave the Market Hasn’t Priced In
At the same time, demand for permanent magnets is exploding.
- U.S. defense demand alone has tripled since 2013, now requiring some 3,000 tons annually.
- Electric vehicles need 1–2 kilograms of magnets per motor.
- A single offshore wind turbine can swallow up two tons.
And now, AI is entering the picture. Hyperscale data centers rely on “nearline” hard drives to store and retrieve vast amounts of information. Each of those drives uses two NdFeB magnets. Western Digital shipped 170 exabytes of nearline storage last quarter alone.
The U.S. government projects domestic magnet demand will more than double by 2030, and then double again by 2050.
But those forecasts probably still underestimate the real-world surge. As prices dropped in the 2010s, engineers found new uses for these magnets in products that never used them before. That Pandora’s box is now wide open.
The West Is Playing Catch-Up
Washington has taken some steps. MP Materials, the only U.S. producer, is ramping production at its “Independence” facility and building a new “10X” plant slated for 2028. USA Rare Earths is lining up aerospace and defense partners.
But the numbers tell the story. By 2026, U.S. capacity may reach 14,000 tons. By then, automotive and wind sectors alone could consume 15,000 tons.
That’s still a shortfall before factoring in military, electronics, and AI demand.
Meanwhile, China continues to invest and tighten its grip. Western companies are already paying premiums just to secure non-Chinese supply.
What It Means for Investors
I’ve been pounding the table on this for months inside Hodge Family Office: Rare earths are not optional. They are mission-critical.
When the supply chain snaps — and it will — the companies positioned to provide non-Chinese supply will see their valuations rerated overnight.
We’ve seen it before. In 2010, when China briefly cut exports to Japan, rare earth stocks went vertical. Prices for some oxides surged 20-fold in a matter of months.
The same setup is here again.
China is still in the driver’s seat. The U.S. is still scrambling. Demand is accelerating in ways the market hasn’t fully digested.
That’s why I continue to recommend select rare earth and critical mineral names in the Hodge Family Office portfolio.
This is the very definition of asymmetric risk/reward.
On one side: complacency, dependence, and geopolitical risk. On the other: a handful of companies ready to supply the free world with the materials it desperately needs.
As investors, the choice is ours.
But make no mistake: the rare earth question is unresolved. And until it is, it will remain one of the most important — and potentially profitable — themes of our time.
Call it like you see it,
Nick Hodge
Publisher, Daily Profit Cycle