Hedge funds are increasing bearish positions in several US critical minerals companies, betting that strong government backing for the sector will not be enough to overcome China’s long-standing dominance of global supply chains, according to a report by the Financial Times.
The report cites data from S&P Global Market Intelligence as showing that short interest has climbed this year in companies including US Antimony Corporation, American Resources Corporation, MP Materials and USA Rare Earth, as investors question whether recent share price gains accurately reflect the industry’s long-term prospects.
The sector has enjoyed a powerful rally following significant support from the US government, including equity investments, loans, defence contracts and other funding designed to build a domestic supply chain for rare earth elements and strategic minerals used in technology, renewable energy and defence applications.
However, a growing number of investors believe valuations have moved ahead of fundamentals. Developing new mines and processing capacity requires substantial capital and typically takes many years, while China retains a dominant position across the mining, refining and processing of many critical minerals.
According to the lending data, the proportion of US Antimony shares on loan—a common indicator of short-selling activity—has risen from 23% to 42% of the company’s market capitalisation this year. American Resources has also seen a sharp increase in bearish positioning, with around 23% of its shares on loan, up from 9% at the end of 2025. Short interest has also increased in MP Materials and USA Rare Earth.
Short-selling specialist Grizzly Research believes some companies in the sector have benefited more from political momentum than underlying business performance. Chief executive Siegfried Eggert said certain stocks appeared to have been driven higher by government rhetoric despite lacking sufficient economic fundamentals to justify their valuations. He declined to discuss the firm’s own positions.
Several of the companies have secured substantial government support. MP Materials has benefited from US government investment and pricing support for selected products. US Antimony has received Pentagon contracts and additional federal funding, while ReElement Technologies, partly owned by American Resources, recently secured Department of Defense financing. USA Rare Earth has also received conditional government funding tied to the development of domestic rare earth production.
The sector has also attracted strong retail investor interest, with significant inflows helping drive share price gains over the past year.
Despite these developments, many investors remain sceptical that the US can rapidly reduce its dependence on China. Industry observers note that China continues to dominate global rare earth processing capacity and retains the ability to influence prices by increasing supply, potentially undermining the economics of new Western projects.
The geopolitical backdrop has also intensified. Last month, China added MP Materials and USA Rare Earth to its export control list, citing their links to the US military, in response to Washington imposing similar restrictions on several Chinese companies.
MP Materials reportedly declined to comment on the rise in short interest, although a person familiar with the company said much of the increase reflected arbitrage trading linked to its convertible bonds rather than outright bearish bets. USA Rare Earth said it remains focused on expanding a secure rare earth supply chain outside China but did not comment directly on its share price performance.
