Image Credit: Tmy350. CC BY-SA 4.0.

Introduction

Rare earth elements, or “rare earths,” are essential components in the technological innovations that have cemented U.S. primacy in the field of research and development. With the emergence of artificial intelligence (AI), these materials have become even more important for powering the complex computer systems now spearheading the technological arms race.  

By slowly monopolizing these materials for decades, China now controls 70% of the world supply of rare earths. As the U.S. technical capacity gap with China shrinks and global trade tensions rise, rare earths and the technologies they power may determine whether the U.S. maintains its position as the global innovation leader. To win what many are calling the “New Cold War” with China, it is essential that the United States invests in securing and broadening access to rare earths. This report evaluates the effect of rare earth supply chains on AI competition with China.  

The Role of Rare Earths in Artificial Intelligence

Artificial intelligence is at the forefront of global discourse around America’s technological competition with China. As researchers make rapid advancements in AI innovation and diffusion, the Trump administration has prioritized securing access to rare earths.  

To understand the implications of rare earth supply chains on national security, it is crucial to first understand the roles of rare earths in technological processes required for AI.   

The term “rare earths” refers to a group of 17 elements with atomic numbers 21, 39 and 57-71 on the periodic table. Despite their name, these elements are relatively abundant within the Earth’s crust. However, they are seldom found in pure form, often mixed with other surrounding elements. The purification process is highly specialized and energy-intensive, giving the elements their name.  

The 17 rare earths can be found highlighted on the table below: 

These elements have specific use cases determined by their chemical properties. Classified by SFA Oxford, these are 1) Semiconductors, 2) Data Storage, 3) Displays, LEDS & Optical Components, 4) Connectivity, Wiring & Circuit Boards, 5) Optics, Imaging & Advanced Materials, and 6) Quantum Computing. The following list summarizes a few important AI use cases for rare earth elements:  

• Yttrium, used in semiconductors, enhances the stability of certain materials critical for high-speed computing, which is required to train and run AI algorithms.  

• Praseodymium has applications in magnetic durability and strength.  With incredibly high melting and boiling points, this element allows hard disk drives (HDDs) to withstand the high temperatures generated by AI data processing.  

• Cerium is used to improve conductivity and device performance in components like LEDs and laser diodes, which are vital to AI system function.  

• Gadolinium alters the properties of certain semiconductor parts, allowing for the integration of enhanced memory systems within AI applications.  

• Neodymium is used in lasers and permanent magnets. The magnets fortified by this element have applications in the rotation capabilities of HDDs, allowing for high-speed data processing with enhanced precision.  

National Security Risks of Rare Earth Shortages

Artificial intelligence systems are reliant on a massive volume of information stored in data centers located all over the world. The data processing and energy requirements needed to run systems like large language models are much more intense than normal computing. This creates a high demand for cooling systems, sophisticated magnets, and sustainable energy sources, all of which require rare earths.  

2024 Rare Earth Global Mine Production Levels in Tons

As displayed on the map above, China has a monopoly over the world’s trade and reserves of rare earth elements. This monopoly has decreased 27 percentage points since 2011, indicating a small success in the U.S. strategy to limit reliance on Chinese exports. However, the ongoing trade war has intensified U.S. dependence on China for rare earths. China has wielded rare earths as economic weapons for years through the placement of export controls, the most recent set imposed in April in response to the Trump administration’s strict trade policies.  

The DoD has named Trusted AI and Autonomy a vital national security interest that will improve military readiness and limit operational weakness in the face of conflict. AI, high-performance computing (HPC), and the advanced semiconductor chips that power them are essential components in nuclear deterrence, weapons testing, conflict simulations, and submarine design. The AI-powered program Pathfinder has been applied to the North Warning System, enhancing U.S. military’s ability to process early warning system data by 98%. HPC is responsible for most electronic weapons testing, including nuclear warheads and hypersonic missiles. At the forefront of this research is the supercomputer El Capitan, which ensures the precision and reliability of the U.S. nuclear stockpile. This system alone runs on almost 45,000 Accelerated Processing Units and, at peak performance, requires energy input equivalent to a mid-sized city. 

These technologies are necessary to ensure military advantage over our adversaries, but the supply chains that sustain them are at risk of disruption. Export controls may have the capacity to delay the development of new generation aircraft, ships, and warheads, posing severe risks to our strategic deterrence.  

Bringing Back the U.S. Rare Earths Industry

The U.S.’s only rare earth mine, MP Materials in Mountain Pass, California, produced most of global rare earth supply for approximately thirty years until China’s accession into the World Trade Organization. In 1995, after its accession, China began to flood global markets with cheap alternatives to many goods, including rare earths. This led to the closure of the MP Materials mine from 2002 to 2017.  

MP Materials’ Mountain Pass Rare Earth Mine and Processing Facility (NASA Earth Observatory)

Since 2020, the U.S. Department of Defense has invested $439 million into securing domestic supply chains of rare earth minerals, with the goal of meeting defense demand of both light and heavy rare earths by 2027. Rare earths were also a fundamental point of agreement in the United States-Ukraine Reconstruction Investment Fund signed in April, as well as a driving force behind Trump’s offer to buy Greenland from Denmark.   

However, it is unclear whether this target will be reached, as the U.S. currently has little light rare earth processing capacity and no heavy rare earth processing capability. Both light and heavy rare earths are necessary components for AI systems. U.S. companies face many challenges derived from China’s rare earth market monopoly, including drastically lower returns, non-competitive prices, and industry stagnation. Furthermore, most American rare earth demand comes from the commercial sector, with only five percent derived from the defense industry.  

As a result, the U.S. imported over 13.6 million kgs of rare earths in 2024 alone, roughly equivalent to 13,600 metric tons. While the MP Materials mine produced 45,000 tons of rare earths in the same year, much of that quantity (roughly 80%) was exported for refinement. As a result, domestic industry only accounted for 20% of U.S. rare earth consumption in 2024. 

The only U.S. facility able produce rare earth magnets, MP Materials’ plant in Texas, is projected to have the capacity to produce 1000 tons of neodymium-iron-boron (NdFeB) magnets per year by 2027. These rare earth magnets are essential components of F-35s, Tomahawk Missiles, and both Virginia and Columbia-class submarines. When compared to the 300,000 tons produced by China in 2024, however, the size of the gap becomes clear. While U.S. industry may soon be able to match military demand, domestic production will not match U.S. commercial demand for the foreseeable future. 

Future Outlook

Increasing our AI advantage over China and decreasing reliance on the country’s rare earth exports will require making new international partnerships in both mining and refinery. While the buildup of domestic industry remains crucial, the urgency of supply chain vulnerabilities and technological competition demands expanding beyond U.S. borders. 

Increasing foreign mining agreements in South America, such as in Brazil or Peru, lowers labor costs for American companies while reducing Washington’s political risk. However, delegating mining to foreign partners comes at a cost, as many local communities face environmental and labor concerns. Officials should explore opportunities for sustainable mining developments that boost local economies and strengthen supply chains.  

Canada and Australia are also potential avenues for increased supply chain partnership. While the U.S. has an estimated three and a half million tons of rare earth elements available within its borders, Canada is predicted to have over fourteen. Although rare earth abundance is not indicative of supply, these two countries have made strong advancements in their processing capabilities, including heavy rare earth refinement. While the U.S. maintains limited contracts with both Australia and Canada, it must increase international cooperation by a large margin to undercut China’s rare earth monopoly.  

Finally, new technologies are being developed that may reduce or eliminate reliance on rare earths. While still in its early stages, scientists are developing permanent magnets that do not contain rare earths, a replacement for the NdFeB magnets discussed above. These developments suggest the possibility of a more sustainable and secure future, in which the U.S. is not dependent on foreign rare earth imports.  

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