Why TMC The Metals Company Stock Is Plummeting Today

Key Points

• The Trump administration is lifting restrictions preventing tech exports to China, and it's pushing TMC stock lower today.

• As part of a potential trade deal with China, the U.S. is trying to secure access to its rival's rare earth minerals.

• Access to Chinese rare earth minerals could weaken TMC's growth outlook, but the U.S. could still need its seabed mining capabilities.

• 10 stocks we like better than TMC The Metals Company ›

TMC The Metals Company (NASDAQ: TMC) stock is getting hit with a wave of sell-offs in Tuesday's trading. The company's share price is down 8.2% as of 1:30 p.m. ET, amid declines of 0.1% for both the S&P 500 (SNPINDEX: ^GSPC) and the Nasdaq Composite (NASDAQINDEX: ^IXIC).

TMC's stock is under pressure today following news that the U.S. has taken a key step to help facilitate a trade deal with China. While a trade deal could help spur positive momentum for the broader market, it could wind up weakening TMC's expansion outlook.

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TMC stock sinks as Trump makes trade concession

In order to help advance trade talks, the Trump administration has lifted export licensing requirements that effectively prevented advanced semiconductors and semiconductor manufacturing equipment from being sold to China. The White House had previously said that an earlier move to allow Nvidia's H20 processor to be sold into the Chinese market was made with hopes of securing continued access to its geopolitical rival's rare earth minerals.

TMC stock has seen massive gains this year as investors have bet that the company's seabed mining capabilities could become an important part of the U.S.'s push to improve its ability to source minerals domestically and through collaborations with allies.

What's next for TMC?

If mineral access winds up being a central component in a trade deal between the U.S. and China, TMC stock could face some strong valuation pressures. The company is still going through the application process needed to receive regulatory approvals to begin its seabed mining operations, and there's a chance that a shift in political dynamics will remove conditions that could have aided TMC in the process.

On the other hand, it's likely that the U.S. will continue to make domestic mineral sourcing a priority, even if a trade deal with China is reached. TMC's outlook remains highly speculative, and the stock is a risky play after rising more than 500% this year. However, the recent tech export news hardly suggests that its growth prospects have been torpedoed.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.