Zooming out

Dear Reader,

With Swiss Islamic Finance we’ve mainly focused on crypto, and rightly so. The cycle underway is offering some of the best opportunities of this decade. But crypto is not the only engine of growth.

From now on, I will also start introducing you to carefully chosen stock thematics, long-term drivers of value creation that will shape the global economy over the coming years.

My approach remains the same: stay disciplined, avoid hype, and look for the “picks and shovels” of each revolution. Always, of course, through the lens of Shariah-compliant investing.

Today’s theme is one of the most overlooked but - potentially most strategic - growth drivers of the AI and robotics revolution: rare earth metals.

Rare Metals: The New “Picks and Shovels”

In 1848, a carpenter at Sutter’s Mill in California made the discovery of his life: gold in the riverbed.

The announcement sparked the California Gold Rush, attracting nearly 300’000 people within just a few years. Yet very few miners actually struck it rich. The real fortunes were made by those who supplied the picks and shovels; merchants like Levi Strauss, who sold denim trousers to miners, creating a brand still around today.

That old proverb “sell the picks and shovels in a gold rush” remains as true as ever. And today, the next “picks and shovels” could be rare earth metals powering the coming robotics boom.

Why Rare Earths Are the “Shovels” of the AI-Robotics Age

Every technological revolution has its hidden suppliers:

• PC Era: Intel (chips) and Microsoft (software) created generational wealth.

• EV Boom: Lithium miners and battery makers like CATL soared over 2,500% in just a few years.

• AI Software Wave: Nvidia (GPUs) became the first $4 trillion public company.

Now comes the next frontier: physical AI, robotics.

Humanoid robots like Tesla’s Optimus rely on dozens of compact, high-torque electric motors. Inside each motor lies a crucial ingredient: neodymium-iron-boron magnets, built from rare earth elements such as neodymium, dysprosium, and terbium.

Each robot could require 2–4 kg of rare-earth magnets, in some cases, more than an electric vehicle. Scale that to millions of units, and you get a demand curve that bends sharply upward.

The Geopolitical Bottleneck

Here’s the catch: China controls more than 85% of the world’s refining and magnet production.

This makes U.S. robotics and AI supply chains extremely vulnerable. Beijing has already restricted exports of certain rare earths, creating weeks-long delays for companies like Tesla.

As robots become strategic assets in industries from manufacturing to defense, this dependency is untenable. The U.S. is now investing billions to rebuild a domestic rare-earth supply chain.

MP Materials: America’s Strategic Bet

At the center of this effort stands MP Materials (NYSE: MP).

• Owner of Mountain Pass, the only operating rare earth mine in North America.

• Building a vertically integrated supply chain, from mining to refining to magnet production.

• Backed by the Pentagon ($400M investment) and Wall Street heavyweights JPMorgan and Goldman Sachs ($1B financing for its “10X Facility”).

• Long-term supply agreements already signed with General Motors.

The Pentagon’s latest funding announcement sent MP shares up nearly 50% in pre-market trading. And this may just be the beginning:

If Tesla alone ramps production of humanoid robots to 5 million units annually, that’s a new demand of 15,000 tonnes of magnets per year, more than the current U.S. output.

Takeaway for Investors

We are at the dawn of a multi-trillion-dollar robotics revolution. Rare earth magnets are as fundamental to this shift as GPUs were to the AI software boom.

China’s dominance creates risk, but also sets up U.S. suppliers like MP Materials for explosive growth as the West scrambles to secure its supply chain.

Just like Levi Strauss selling jeans to miners, the biggest winners may not be the robots themselves, but the suppliers enabling them.

Rare metals are the “picks and shovels” of the AI-robotics age. Smart investors should pay attention now.

⚠️ Important Note

This newsletter is here to inform you about the trend and the thematic opportunity. It is not investment advice, nor a recommendation to buy MP Materials today.

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—
Saâd
from Swiss Islamic Finance