AI, Defense, & More: The Case for Investing in Rare Earths

Advisors and investors who have been keeping an eye on recent headlines are likely aware that rare earths are becoming increasingly valuable for countries across the globe. After all, countries like the United States are looking to decouple from China’s dominant position in the rare earth industry by investing in new critical mineral and battery projects.Key Takeaways: Rare earths are already offering a strong opportunity set due to geopolitical tensions, but the advantages go far beyond politics. Manufacturing key products in sectors like energy, artificial intelligence, and defense requires these materials. This creates potent long-term demand. Investors can gain targeted access to ex-China rare earths through the Sprott Rare Earths Ex-China ETF (REXC). That being said, do ex-China rare earths warrant concentrated investment within their portfolios right now? Would this investment be more of a geopolitical play, or are there other factors that folks should be considering? Fortunately, there are plenty of long-term growth factors that can work in favor of rare earths. Rare earths have plenty of industrial applications, which are applicable across a variety of different sectors. As one example, rare earths are currently very necessary for the AI buildout. Rare earths are being utilized in the manufacturing of semiconductors, powerful magnets, amplifiers, and other components. Since AI growth isn’t slated to slow down any time soon, this can be a significant demand driver for rare earths. See More: Don’t Overlook Silver’s Potential Amid the New Gold RallyApplications Beyond Artificial IntelligenceFurthermore, the energy sector also uses rare earths. This includes applications within nuclear energy, wind turbines, and more. And considering how energy companies are likewise benefitting from AI momentum, demand for rare earths by this sector will likely not slow as well. Beyond AI and energy, rare earths are a crucial material for the defense sector. They are used in the manufacturing of drones, missile guidance systems, night vision goggles, and much, much more. Given the state of geopolitics at the moment, defense spending isn’t likely to slow any time soon.Tackling the Ex-China Rare Earth Opportunity with REXCThose looking to take advantage of what rare earths have to offer may want to take a look at the Sprott Rare Earths Ex-China ETF (REXC). REXC is a compelling fund from the Sprott team that focuses its investments towards companies domiciled outside of China and the United States. This approach lets the fund tackle opportunities within both geopolitcs and manufacturing. As countries continue to amplify their supply chains to decouple from China, REXC can benefit. Meanwhile, the menagerie of sectors that need rare earths to manufacture key goods and components could help keep demand up in the long-term. 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