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Defense · Equity Investment · Rare Earths · Supply Chain
The Department of Defense, under the Trump administration and led by Deputy Defense Secretary Steve Feinberg, has fundamentally shifted its funding strategy, becoming an active equity investor in critical defense industries, exemplified by a $400 million stake in MP Materials, making it the company's largest shareholder with a 15% ownership position.
This unprecedented move, unfolding since March 2025, reinterprets the Defense Production Act to establish domestic rare earth supply chains, crucial given China's 85% control of global processed supplies and the spring 2025 supply crisis. The investment mobilizes an additional $1 billion from JP Morgan and Goldman Sachs, and a subsequent $500 million from Apple, demonstrating the government's power to attract private capital.
The Pentagon also provides a 10-year price floor guarantee at nearly double current market rates and customer commitments for MP Materials' magnet production. While the market responded positively, with MP Materials stock jumping 43%, challenges include MP Materials' lack of direct magnet production experience and China's multi-decade technical lead.
The strategy aims to create "national champions" and is expected to expand to other critical minerals like Lithium, Cobalt, Gallium, Germanium, Graphite, and Titanium, with further announcements anticipated in fall 2025.
