Trump to announce $70 billion in AI and energy investments
In a unique event, the US government, specifically the Department of Defense (DoD), bought a 15% stake in the nation’s largest rare earth miner, MP Materials Corp (NYSE:MP). The DoD is buying $400 million of MP’s convertible preferred stock. The transaction will make the government MP’s largest shareholder. The following quote on the benefits of the partnership to the country is from MP CEO James Litinsky, courtesy of Forbes:
“This partnership will dramatically accelerate America’s rare earth magnet manufacturing capabilities, ensuring a secure and resilient supply chain for our national defense and critical industries.”
The partnership between DoD and MP aims to accelerate the development of the nation’s rare earth magnet supply chain and construct a new “10X” magnet facility. Specifically, its goal is to significantly expand U.S. production of neodymium-iron-boron (NdFeB) magnets, which are critical for military and commercial applications, such as F-35 jets, electric vehicles, and wind turbines. Currently, China produces nearly 90% of NdFeB magnets.
The benefits of the transaction for the country include strategic independence of critical minerals and economic growth. However, the partnership presents the government with risks in terms of market valuations and financial risk if MP can’t live up to expectations. As shown, MP shares rose about 50% on the news.
What To Watch Today
Earnings
Economy
- No economic reports today
The Week Ahead
Earnings season begins in earnest this week with the largest banks and smaller regional banks reporting on Tuesday and Wednesday. Netflix (NASDAQ:NFLX) will report on Thursday, with American Express Company (NYSE:AXP) and MMM on Friday.
Tuesday’s CPI and Wednesday’s PPI reports will be very helpful in appreciating how tariffs are impacting inflation. Thus far, there has been a negligible effect. However, the June reports will fully capture a period when the tariffs were being enforced. If data continues to be on the weak side, we suspect the Fed will become more dovish. However, higher-than-expected inflation data may allow them to continue to postpone rate cuts. Also of note this week will be retail sales on Thursday.
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