3 Ways to Target the Resources Powering AI and Data Centers

Why It Matters

Rising AI‑driven data‑center construction tightens the rare‑earth supply chain, turning material producers into high‑growth investment themes and a strategic focus for U.S. policy.

Key Takeaways

• Data centers' AI growth fuels rare‑earth and battery‑metal demand
• EART ETF offers 20% YTD return, 0.59% expense ratio
• ION ETF delivers ~30% YTD gain, focuses on lithium, nickel, cobalt
• MP Materials is the only U.S. rare‑earth miner, up 30% YTD
• Analysts see 15% upside, price target $79 for MP

Pulse Analysis

The rapid expansion of data centers, spurred by generative AI and cloud computing, has exposed a hidden bottleneck: the supply of rare‑earth elements and battery metals essential for high‑performance processors. As hyperscale operators add millions of square feet of floor space, demand for neodymium, dysprosium, lithium, nickel and cobalt climbs in tandem, pressuring a market already dominated by a handful of overseas producers. Investors are therefore looking beyond the obvious data‑center REITs to the upstream material providers that can sustain the growth curve.

Two exchange‑traded funds have emerged as convenient vehicles to capture this trend. The Global X Rare Earth & Critical Minerals ETF (EART) tracks a diversified basket of miners and processors, delivering a 20% year‑to‑date gain with a modest 0.59% expense ratio. Its holdings are spread across roughly 50 companies, with China accounting for about 30% of assets. ProShares' S&P Global Core Battery Metals ETF (ION) leans into lithium, nickel and cobalt producers, posting an even stronger 30% YTD performance and a slightly lower 0.58% fee. Both funds suffer from low liquidity and a heavy reliance on Chinese exposure, factors that risk adding geopolitical volatility to their otherwise attractive return profiles.

For investors seeking a domestic foothold, MP Materials (MP) stands out as the sole U.S. rare‑earth miner with an operating mine in California. The company has surged more than 30% this year, buoyed by bipartisan calls for supply‑chain resilience and a growing consensus that U.S. rare‑earth independence is a strategic imperative. Analysts assign a unanimous "Buy" rating and project a price target above $79, implying roughly 15% upside. As policy incentives for critical mineral production intensify, MP could become a bellwether for the broader American rare‑earth sector, offering both growth potential and a hedge against foreign concentration risks.