Rare Earth Stock Surge: Just Another Capital Scam?

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Last week, a friend in quantitative trading excitedly messaged me: "Rare earth stocks are about to hit the moon, does your company have related tech reserves?" I looked at the screenshot he sent: Grinm Advanced Materials up 200%, Oulei New Materials up 350%, Orient Zirconium doubled in a month. I told him to clear his positions first; I've seen this kind of rally at least three times.

The conclusion is clear: This is a typical theme speculation. The actual implementation of rare earths in semiconductors is nowhere near as sexy as the market portrays. China's export controls on rare earths are a strategic move, but A-share capital is just seizing the opportunity, packaging "positioning" as "chokehold," and misinterpreting "price hikes" as "revolution." What truly rewrites the semiconductor profit landscape has never been the raw materials themselves, but manufacturing processes and design capabilities.

History Never Gets Old: Every "Resource Revolution" is a Capital Carnival

From the Rare Earth Wars of 2010, to Cobalt and Lithium in 2017, to Silicon Material in 2020, the speculation logic on upstream resources in A-shares has never changed. Every time it's a triple buff of "scarcity + policy + domestic substitution," followed by stock prices doubling, then fundamentals failing to keep up, and finally leaving a mess.

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Rare earth export controls causing dysprosium oxide prices to triple is indeed a major step for China in strategic resources. But equating price fluctuations with technological breakthroughs is the capital market's favorite sleight of hand.

Grinm Advanced Materials makes rare earth magnetic materials, Oulei New Materials makes target materials, and Orient Zirconium makes zirconium products. How deep is their coupling with core semiconductor processes? I checked: Grinm's revenue from semiconductor target materials accounts for less than 20%, and Orient Zirconium's fused zirconia is mainly used in ceramics and refractory materials. What rose this round is essentially "rise if associated," not "core beneficiary."

Technical Bottlenecks: The Role of Rare Earths in Semiconductors is Far From a "Compute Power Nuclear Button"

News headlines saying "from raw materials to compute power nuclear button" are extremely misleading. Rare earths in semiconductors are mainly used in:

• Polishing Slurry: Cerium oxide for CMP (Chemical Mechanical Polishing), low usage, many substitutes.
• Sputtering Targets: Some rare earth metals for thin film deposition, but high technical barriers and extremely low localization rate.
• Magnetic Materials: Neodymium magnets for motors, but no direct relation to chip compute power.

What truly determines chip compute power are lithography machines, etching machines, deposition equipment, EDA software, and advanced packaging. These links have almost nothing to do with rare earths. Rare earth controls can choke supply chains for certain high-end devices, like military radar and fiber lasers, but will not affect 7nm or 5nm chip production.

More critically, the global semiconductor materials market is accelerating de-rare-earthization. TSMC, Samsung, and Intel are all developing rare-earth-free polishing slurries and alternative targets because the rare earth supply chain is too fragile. Once China imposes controls, Western companies will accelerate alternative R&D, a process that might take only 3-5 years. By then, the valuation logic for rare earth concept stocks will collapse completely.

Misalignment Between Strategic Positioning and Capital Carnival

China listing seven categories of medium/heavy rare earths under export controls is the correct strategic choice. The surge in European dysprosium oxide prices proves China's rising voice in rare earths. But the problem is that A-share capital translated this strategic action into "a new direction for domestic semiconductor substitution," which are two completely different logics.

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Strategic positioning is a long-term game; capital carnival is a short-term game. Rare earth controls can increase negotiation chips, but cannot directly "rewrite" the semiconductor profit landscape. The profit landscape is defined by Qualcomm, TSMC, ASML, and Cadence, not by raw material suppliers.

What China truly needs to break through in semiconductors is:

• Advanced Process Lithography Machines (Shanghai Micro Electronics is still stuck at 28nm)
• EDA Tool Chains (Empyrean covers limited scope)
• High-Purity Semiconductor Materials (Electronic-grade silicon wafers, photoresists, specialty gases)
• Advanced Packaging Equipment (JCET and Tongfu Microelectronics are still catching up)

None of these links can be solved by rare earths. The significance of rare earth controls is "if you have it, I have it too," but it's still ten orders of magnitude away from "winning the chip war with this."

Rational Judgment: How Long Can This Rally Last?

Historically, resource stock speculation usually lasts 3-6 months, followed by downward reversals as earnings miss expectations, policies marginally change, and downstream demand is disproven. Current rare earth concept stocks have already risen 200%-350%, with severe valuation bubbles. Grinm's dynamic P/E exceeds 150x, and Orient Zirconium exceeds 200x, while their corresponding earnings growth might only be 20%-30%.

Watch for two signals:

1. Whether dysprosium oxide prices pull back (once supply-side expectations are fully digested, prices will fall).

2. Whether related companies announce shareholder reductions (this is often a precursor to bubble bursting).

If I were a fund manager, I would take profits in batches after the stock price doubles, rather than chasing highs. After all, every narrative in A-share history about "breaking foreign monopolies" eventually turns into "concept stock traps."

Wrap it up directly.

Original Link: https://www.tmtpost.com/8062719.html