One to Watch: Lithium Stock Practically Doubles in a Day

“Gotta be in commodities” is what I’ve been telling investors for years. In case you don’t believe it, just take a look at the awe-inspiring price jump of one particular lithium stock this week.

The Trump administration is reportedly looking to take a share position in Lithium Americas (LAC), which is set to operate the largest lithium mine in the U.S. Furthermore, the administration’s stake in Canada-headquartered Lithium Americas could be as much as 10%.

LAC stock rocketed higher on Wednesday, practically doubling in price on the news. The share price of General Motors (GM), which owns a 38% stake in Lithium Americas’ Thacker Pass lithium mine, rose by 2%.

Although Lithium Americas is a Canadian company, its Thacker Pass lithium mine is located in Nevada. In any case, there’s no denying that the Trump administration is committed to expanding America’s lithium production capacity for the long term.

Courtesy: @Andr_rej

As you might expect, Lithium Americas stock wasn’t the only commodity stock to take flight. A slew of other lithium-associated resource stocks also moved higher in sympathy with LAC stock.

Why is the federal government interested in domestic lithium projects? For one thing, there’s a shortage in progress, as the IEA declared that meeting its base-case lithium demand will require 55 additional average-sized mines by 2035.

There are also national security concerns to consider. Just like the Trump administration took a 10% stake in Intel for America’s national security, the same rationale could apply with domestic lithium production as the U.S. doesn’t want to depend on foreign mineral sources.

Besides, lithium has critical real-world applications. Key use cases for lithium include portable electronics, unmanned aerial vehicles and drones, electric vehicles and their batteries, advanced weapon systems, as well as surface and undersea vessels.

Courtesy: @Flowsandforces

This news-driven catalyst’s impact on Lithium Americas stock is impossible to ignore, and some commentators might conveniently call it the “Trump effect.” However, there’s a much bigger phenomenon in play here and it’s not just a matter of predicting which stock President Trump will want to buy next.

It’s really a major shift as the government in now taking a more active role in fostering domestic production of essential minerals. In another example of this, the share price of rare-earth materials specialist MP Materials (MP) surged by more than 50% as the Department of Defense became MP Materials’ largest shareholder.

The Trump administration is also serious about promoting U.S. production of uranium – again, for national security but also for the nation’s economic well-being. So now, it’s up to investors to think about which resources the federal government might also seek to support.

Two obvious candidates would be copper and silver, both of which are crucial industrial metals. It’s possible to own these physical metals, though it’s easier and more convenient to own carefully selected mining shares.

In other words, the idea isn’t to chase after a stock that just doubled in a day, but instead to look toward the future of domestic resource production. It’s an exciting time to be invested in crucial commodities, especially if you’re consistently on the winning side of the trade.