In 2006, Google opened a data center in a small town in Oregon. It used as much power as a mid-size city. Inside were rows of servers, each one running on tiny rare earth magnets tucked inside cooling fans and hard drives. Nobody thought twice about where those magnets came from.

Twenty years later, the five biggest tech companies spent $400 billion on data centers in a single year. The magnets got bigger. They show up in cooling systems, storage racks, chips, and communications gear. Cooling alone eats about 20% of a data center's total power bill. The magnets that keep those systems running are made from rare earths — the same metals that go into EV motors and missile guidance systems.

That's the setup for a new report from Sprott Asset Management. Their case: AI has become the third big driver of rare earth demand, right alongside defense and EVs. The IEA says AI data centers will consume 3% of the world's magnet rare earths by 2030. Three percent sounds small. But the rare earth market is tiny and already stretched — neodymium is up 64% this year, dysprosium up 105%.

So any new source of demand in a tight market matters a lot. Sprott's Steve Schoffstall laid out the numbers in a webcast last week. The five biggest hyperscale operators — Meta, Microsoft, Google, Amazon, Apple — committed $400 billion in capital spending in 2025 alone. Every facility needs rare earth magnets to run. And the demand is structural — tied to national security and energy policy, not the next earnings quarter.

Because the supply side is worse than most people think. China makes 94% of the world's permanent magnets. They mine the ore, refine it, turn it into metal, and build the finished product. No other country comes close. The West does almost none of this at any real scale.

Defense is pulling in the same direction. Global military budgets have hit $2.6 trillion a year, and NATO members agreed to push spending to 5% of GDP. Starting January 1, the Pentagon bans Chinese rare earth magnets from American weapons systems. Lockheed Martin and Northrop Grumman are racing to qualify new suppliers — because the magnets the military needs are the same ones the data centers need.

Sixteen years. That's how long it takes, on average, to bring a new rare earth mine from discovery to production. Most projects that could serve the 2030 AI build-out aren't even through permitting. The demand is arriving now, and the supply isn't close. Schoffstall says most investors haven't connected AI to rare earths yet — and that gap is where the next move starts.

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China's Northern Rare Earth, the country's biggest rare earth producer, just posted record first-half production. The company expects H1 2026 net profit of roughly RMB 2 billion ($280 million), more than double a year ago, driven by record production and higher prices. Its magnetic materials arm alone pulled in RMB 9.5 billion ($1.3 billion) in revenue, up 107% from last year. Output of separated rare earth products, metals, and advanced materials all hit record highs for any first half. China's biggest producer is moving deeper into magnets and alloys while the West is still building its first separation plants.

The IEA projects that average recycling rates across key energy minerals could climb from about 10% today to close to 20% by 2040, doubling secondary supply's share of global demand. Europe is starting to build the plants — Italy approved the INSPIREE project in Ceccano, the continent's first industrial-scale facility for pulling rare earths from old magnets. It will handle up to 2,000 tons of magnets a year and recover neodymium, praseodymium, and dysprosium. But China still holds more than 75% of global battery recycling pre-treatment capacity and 90% of battery material recovery. One plant in Italy won't close that gap on its own.

All 18 rare earth and technology metals tracked by rare-earth-mining.com rose in price in July — the first time every tracked metal has gained in the same month this year. The average gain was 16.7%, the first broad-based rally of 2026 after six months of mixed moves. Germanium led at +27.8%, followed by indium (+26.5%) and dysprosium (+25.4%). NdPr alloy, the key feedstock for permanent magnets, hit a new 2026 high of $133.02/kg on the Shanghai benchmark, up 21.4% from June. Terbium oxide cleared its April peak to reach $1,179.54/kg, with both heavy rare earth magnet metals now rising together.

Steve Schoffstall, Managing Partner & Head of ETFs, Sprott Asset Management
April, 2026

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Praseodymium is neodymium's twin. The two metals show up in the same ores and are almost never separated — it costs more to split them apart than they're worth on their own. Instead, they're blended into NdPr alloy, the most important input for the permanent magnets that run EV motors, wind turbines, and data center cooling systems. At $245.40/kg, praseodymium is up 70% this year and 237% since 2020, and NdPr alloy hit a new 2026 high of $133.02/kg in July. Every wind farm, EV factory, or data center the world builds needs more of this alloy — and only one country makes enough of it.

REEx's latest weekly tracker flagged the talent gap as one of the West's biggest long-term risks. Retired engineers in their 70s and 80s are being pulled back into the workforce to staff new separation plants in France and the U.S. because younger replacements don't exist. Rebuilding mining and refining know-how could take a generation.

— Rare Earth Exchanges

The company is weighing spin-offs, asset sales, and joint ventures to raise cash and fund development of one of the world's largest known rare earth deposits. Tanbreez sits in southern Greenland. First production is targeted for 2028–2029.

— Mining.com

The January 1, 2027 deadline bars defense contractors from using Chinese-origin rare earth magnets in U.S. weapons systems. Several firms say non-Chinese magnet supply can't meet demand in time. The Pentagon hasn't budged.

— Financial Times

The Pforzheim plant uses a hydrogen-based process to recycle NdFeB magnets without chemicals. Germany's Federal Ministry of Economic Affairs attended the April 28 launch.

— electrive.com