The U.S. Can't Afford to Be 'Vulnerable' in This Industry

Editor's note: Matt McCall has successfully navigated every bull market of the past 15 years by pinpointing big "hypergrowth" market trends. He looks for companies driving the changes that will redefine the future... And with this approach, he has been able to find 54 different investments that could have made you 10 times your money or more. Today, Matt joins us to discuss a looming challenge (and opportunity) that could boost one emerging U.S. industry...

It's not often that I agree with government officials.

A couple weeks ago, one U.S. trade representative expressed concern regarding China's dominance in rare earth elements. And I couldn't help but nod along as I watched the interview...

You see, China could "turn off the faucet" when it comes to rare earths.

Rare earth metals play a major role in the U.S. economy and are vital to our technology. They're used in everything from smartphones and computers to solar panels and electric vehicles.

Back in the 1980s, the U.S. was the leader in rare earth production and refining. Then, China became a more cost-effective alternative. And now it controls nearly the entire refining industry for rare earths.

So if China were to cut off supply, technological developments would grind to a halt...

In an exclusive interview with CNBC's Martin Soong on August 26, U.S. Trade Representative Katherine Tai drew attention to this – stating that "China's dominance in rare earths makes U.S. supply chains vulnerable."

And while China cutting off its supply may seem like an extreme scenario, we've already seen it happen in some form...

Earlier this summer, China added two key rare earth elements to its export controls list – germanium and gallium, which are used in semiconductors and satellites. The export restrictions went into effect on August 1.

And as long as tensions between the U.S. and China remain high, I wouldn't bet against the possibility of more sweeping rare earth export restrictions in the future.

The good news is that we're slowly working our way back toward having our own rare earth industry here in the United States. The U.S. Department of Defense has awarded hundreds of millions of dollars to boost investment in rare earth metals domestically – which includes things like production mines and refineries.

So it's only a matter of time before China's grip on the rare earth sector loosens.

I believe that more investment in a U.S.-based rare earth industry is inevitable, and that makes it one of the hypergrowth megatrends I'm incredibly bullish on over the long term.

The stocks in this space have underperformed recently...

The VanEck Rare Earth/Strategic Metals Fund (REMX) – which tracks this niche sector – is down 7% so far this year and more than 25% over the past 12 months.

But we're only in the beginning stages of this shift. Many of these U.S. rare earth facilities are still under construction and won't be ramping up to full production for a few years.

That means these stocks are undervalued... And that makes now the perfect time to get in. I'm confident that patient investors who are willing to ride the ups and downs will be rewarded in the years ahead.

Here's to the future,

Matt McCall

Editor's note: Brett Eversole is teaming up with Matt for an urgent market briefing on Tuesday, September 12. It involves a new bull market prediction... one that could eclipse even the recent AI mania. And they believe that if you make the right moves now – and avoid the stocks that will lead many of today's investors astray – this could turn out to be the biggest moneymaking opportunity of the past 30 years. Tune in online for free by signing up here.

Further Reading

"The gloves are clearly coming off in the tech war between China and the U.S.," Brian Tycangco writes. Beijing's recent restrictions on gallium and germanium exports are likely just the beginning. But even if China clamps down on other key metals, it may lead to opportunities down the road... Read more here.

"Technology grows and interacts with other things in ways that even the brightest technologist can't predict," Matt Weinschenk says. The burgeoning AI industry is a prime example. If you plan to profit as this trend advances, keep one thing in mind during these early days... Learn more here.