Hedge funds have sharply increased bearish bets against several U.S. critical minerals companies, signalling growing skepticism that Washington’s aggressive spending campaign can quickly loosen China’s dominance over global supplies of strategic materials despite billions of dollars in government support.
Short positions against companies including U.S. Antimony Corporation (NYSEAMERICAN: UAMY), American Resources Corporation (NASDAQ: AREC) and MP Materials Corp. (NYSE: MP) have climbed this year, according to stock lending data from S&P Global Market Intelligence released on Friday.
Investors who sell stocks short profit if share prices decline, making the increase a sign that many funds believe recent gains have outpaced business fundamentals. The skepticism follows a powerful rally across the sector.
Last year, the Trump administration directed billions of dollars toward domestic critical minerals projects through equity investments, loans and defence contracts. Officials aimed to reduce U.S. dependence on Chinese supply chains for rare earth elements and other strategic minerals used in military equipment, electronics, renewable energy technologies and electric vehicles.
However, many investors question whether government backing alone can overcome China’s decades-long investment advantage.
Developing new mines and processing facilities often takes a decade or longer. China also retains significant control over global refining capacity and can influence prices by increasing supply.
Consequently, some hedge funds believe current company valuations assume progress that could take years to achieve.
Siegfried Eggert, chief executive of short-selling firm Grizzly Research, said some companies appeared to benefit more from political enthusiasm than durable business performance. He argued several valuations lacked sufficient economic support and declined to discuss his firm’s current positions.
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US Antimony has experienced a dramatic rally
MP Materials is the largest rare earth producer in the United States. It has also become one of the sector’s biggest success stories. The company’s shares more than tripled last year after the U.S. government acquired an equity stake and guaranteed minimum prices for certain products.
Earlier, venture capitalist Chamath Palihapitiya invested in MP Materials through a special purpose acquisition company transaction completed in 2020.
Meanwhile, U.S. Antimony also experienced a dramatic rally. Its shares nearly tripled during 2025 after securing major government support.
The company won a Pentagon contract worth up to USD$245 million to supply antimony and later received a USD$27 million investment from emergency funding originally designated for Ukraine.
Its board also includes retired General Jack Keane, whom President Donald Trump previously described as one of his closest military advisers before awarding him the Presidential Medal of Freedom in 2020.
Additionally, American Resources benefited from government support through its former subsidiary, ReElement Technologies. American Resources still owns a 17 per cent stake in the company, and both businesses share the same chief executive.
ReElement announced in July that it secured USD$25 million in funding from the U.S. Department of Defense.
USA Rare Earth Inc. (NASDAQ: USAR) also attracted significant attention. The company received conditional Commerce Department funding valued at approximately USD$1.6 billion in exchange for roughly a 10 per cent government equity stake.
Retail investors eagerly joined the rally.
According to Vanda Research, individual investors directed almost USD$200 million into U.S. Antimony and USA Rare Earth shares combined last year after previously showing little interest.
However, analysts continue to point toward China’s commanding market position.
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Short interest has risen on multiple companies
China dominates much of the world’s rare earth mining and, more importantly, processing infrastructure after investing heavily in the sector for decades.
A recent report from SAFE’s Center for Critical Minerals Strategy argued that Western countries possess sufficient geological resources but continue facing a persistent shortage of financing needed to build competitive supply chains.
Furthermore, financing represents only one obstacle. Companies must also navigate permitting, construction and technical challenges before producing commercially significant volumes.
The report suggested that access to capital remains one of the biggest barriers slowing Western efforts to compete with China.
Short sellers appear increasingly convinced those obstacles will delay meaningful returns.
According to S&P Global Market Intelligence, shares on loan for U.S. Antimony increased from 23 per cent to 42 per cent of its market capitalization this year. Stock lending activity often serves as a proxy for short selling because investors borrow shares before selling them.
Meanwhile, short positions in American Resources climbed from 9 per cent to 23 per cent of market capitalization. The company reported no revenue during the previous year while continuing to develop its critical minerals extraction and recycling businesses.
Short interest also increased in MP Materials this year.
Likewise, bearish positions edged higher against USA Rare Earth, which has not yet begun mining material from its Texas rare earth deposit.
Christian Putz, founder and chief executive of ARR Investment Partners, said history shows that rare earth prices often spike briefly before China responds by expanding supply and driving prices lower.
He argued China’s near-monopoly over rare earth processing gives it powerful tools to influence global markets.
Additionally, geopolitical tensions continue reshaping the industry.
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