lithium stocks

Investing in Lithium Stocks: Top Picks for 2023

The world of green energy and electric vehicles is changing fast. Lithium is a key player in this change. As more people switch to electric cars, the demand for lithium-ion batteries is going up. This makes lithium stocks an interesting choice for investors.

But, the lithium market has seen ups and downs. It’s hard to know which lithium stocks are good picks for 2023 and the future. Let’s look at what makes some lithium stocks stand out.

Key Takeaways

  • The global lithium market is expected to face a significant undersupply by 2030, with demand projected to outpace supply by over 500,000 tons1.
  • Lithium demand is forecast to grow by more than 30% annually through 2030, driven by the increasing adoption of electric vehicles1.
  • Lithium spot prices have been volatile, currently facing a decline due to oversupply but poised for a potential rebound as the undersupply materializes1.
  • Leading lithium producers like Albemarle, Sociedad Química y Minera de Chile, and Lithium Americas are well-positioned to capitalize on the growing demand23.
  • Investors should carefully evaluate the risks and diversify their lithium stock portfolios to mitigate the inherent volatility in the industry.

Introduction to Lithium Stocks

The world is moving towards a greener future, making electric vehicles (EVs) more popular. This has led to a big increase in the need for lithium-ion batteries. As a result, investors are now very interested in lithium stocks. These are companies that mine, refine, and distribute this important metal4.

What are Lithium Stocks?

Lithium stocks are shares of companies in the lithium industry. These companies are key in getting lithium from the ground, making it ready for use, and sending it out to customers. With more people choosing electric cars, the demand for lithium has gone up a lot. This has made lithium stocks more valuable4.

Lithium’s Role in Electric Vehicle Batteries

Lithium is a must-have in lithium-ion batteries for electric vehicles. These batteries let electric cars go a long way before needing a recharge. With more people buying electric cars, the need for lithium has grown a lot. In 2023, about 18% of new car sales were electric vehicles5. This trend is likely to keep going, which will help the lithium industry and lithium stocks grow.

“The global move to electric vehicles has led to a big increase in lithium demand. Lithium is key for the batteries that power these vehicles.”

The Lithium Market Landscape

The lithium market has seen big changes in recent years. Prices have gone up a lot, and things that affect demand and supply have changed6. From 2021 to 2022, lithium prices jumped by 1,000%, reaching new highs6. After 2022, lithium producer shares dropped a lot because of the fall in lithium prices6.

Lithium Price Fluctuations

Lithium carbonate prices have been changing a lot6. In China, prices dropped by 67% from last year, reaching $20,782 per tonne67. This big change is due to many factors, like more EV and battery production during the pandemic, then less as interest rates went up and auto sales fell8. Now, the way lithium is priced has changed to better handle price changes. This includes spot prices, index-linked contracts, and financial tools like futures and options8.

Factors Affecting Lithium Demand and Supply

Many things affect the lithium market8. From 2010 to 2024, the use of lithium in batteries grew from 23% to over 85%87. By 2030, the demand for lithium is expected to be over 2.4 million metric tons, and it could hit 3.8 million tons by 2035, thanks to EV batteries7. Even though production has gone up, prices have dropped. But, the demand for lithium from EVs and energy storage is still strong6. Experts predict a small deficit in lithium by the end of 2025, and a bigger one by 20306.

The lithium market stays stable with long-term deals, making mining investments more predictable8. But, it’s moving towards more flexible pricing like spot prices and futures contracts8. These changes bring more transparency, better risk management, and quick price updates through digital trading8.

“The lithium market has experienced significant price volatility, especially in 2023, when demand surpassed supply, causing spot prices to surge.”8

Even with price ups and downs, the market looks good for the future. New pricing methods and clear market trends are bringing in more investments8. Experts think lithium demand will grow fivefold by 2040, showing big opportunities in the lithium market8.

Investing in lithium stocks

Investing in lithium stocks can be exciting, with prices changing a lot due to supply and demand9. The future looks bright for lithium because of electric vehicles and energy storage needs9. But, be ready for big changes in stock prices9.

Staying on top of the lithium market means spreading out your investments and thinking long-term9. You can look into buying lithium stocks, lithium ETFs, or a mix of both9.

Investment Strategy Potential Benefits Potential Risks
Direct Lithium Stock Purchases
  • Potential for higher returns
  • Ability to capitalize on specific company growth
  • Higher volatility
  • Concentration risk
Lithium-Focused ETFs
  • Diversification across the lithium value chain
  • Lower volatility compared to individual stocks
  • Potential for lower returns compared to individual stocks
  • Exposure to the entire lithium industry, not just top performers

Choosing between direct stock investments or ETFs depends on how much risk you can handle, your investment time frame, and your overall investment plan9. By looking at the good and bad of each option, you can make choices that fit your financial goals and how much risk you’re okay with when investing in lithium stocks10.

“Investing in lithium stocks can be a volatile endeavor, but the long-term potential for growth in the EV and energy storage sectors makes it an intriguing investment opportunity for those willing to navigate the market’s ups and downs.”

Top Lithium Stocks for 2023

The world is moving fast towards electric vehicles (EVs), making lithium more important than ever11. The International Energy Agency says one in five new cars sold in 2023 will be electric11. Over 2.3 million EVs were sold in the first quarter of 2023, a 25% jump from last year11. This rise in EVs makes lithium stocks a great choice for investors looking to grow their money.

Albemarle (NYSE:ALB)

Albemarle (NYSE:ALB) is a top pick for lithium stocks. It’s a leading supplier of lithium worldwide11. The company saw its net income soar to $650 million from $496.8 million last year, with sales hitting $2.37 billion from $1.48 billion11. They’re expecting sales to jump by 40% to 55% and adjusted EBITDA to rise by 10% to 25% this year11.

Analysts are raising their price targets for Albemarle. RBC Capital sees it reaching $260, while Bank of America predicts $212, Credit Suisse $185, and Mizuho $227 per share11.

Ganfeng Lithium (OTC:GNEN.F)

Ganfeng Lithium (OTC:GNEN.F) is another strong contender for 2023. It’s China’s biggest maker of lithium for batteries12. The company plans to get 70% of its lithium from its own sources by 202512. This move will help it meet the growing demand in China and the US.

With a solid track record and a strong financial position, Ganfeng Lithium is a smart choice for investors interested in lithium.

Albemarle and Ganfeng Lithium are set to gain from the growing lithium demand due to electric vehicles13. Investors should look into these and other top lithium stocks to make a well-rounded portfolio. This can help them take advantage of the lithium industry’s promising future.

Sociedad Quimica y Minera de Chile (NYSE:SQM)

Sociedad Quimica y Minera de Chile (NYSE:SQM) is a key player in the lithium market. It’s one of the top companies in South America’s basic materials and chemicals sector. With a market cap of $11.82 billion, it’s a leader in producing lithium for batteries and energy storage14. The company looks undervalued with a forward P/E ratio of 10.67 and a PEG ratio of 0.8814.

However, SQM faces risks from Chile’s plan to nationalize the lithium industry15. Despite this, the company is investing in increasing its production capacity. It believes demand for lithium will grow faster than supply in the long term14. SQM’s stock has grown by 88% in 2022, thanks to high demand for lithium-ion batteries in electric vehicles15.

The stock price of SQM has seen big changes, with a -11.62% change over 11 months and a -13.06% change in the last three months16. Over the past year, its stock price dropped by -47.77%16. SQM’s recent returns have been lower than the U.S. Electrical industry and the broader U.S. market, with a -47.8% return in the past year16. Yet, its price volatility is lower than the industry average, in line with the market average16.

Metric Value
Market Cap $11.82 billion14
PE Ratio (TTM) 29.9914
Forward Dividend Yield 5.07%14
Profit Margin 6.25%14
Return on Assets 12.65%14
Return on Equity 7.87%14
Revenue $6.29 billion14
Total Cash $2.25 billion14
52-Week Range $38.50 – $81.5014
1-Year Target Estimate $65.9614
Forward P/E Ratio 10.6714
PEG Ratio (5yr expected) 0.8814

Despite risks, SQM is a strong choice for investing in the lithium and electric vehicle battery markets15. Investors should watch the company and Chile’s regulations closely. This could make SQM a good addition to their lithium-focused portfolios141516.

Lithium Americas (NYSE:LAC)

Lithium Americas (NYSE:LAC) is a speculative stock, focusing on developing lithium sites in Argentina with Ganfeng Lithium. It hasn’t made any money yet17. But, General Motors invested $650 million in the company, showing big trust in its future17. This makes Lithium Americas a riskier but intriguing choice for investors.

General Motors’ Investment in Lithium Americas

General Motors (GM) invested $650 million in Lithium Americas, highlighting the need for reliable lithium17. This move aims to secure lithium for GM’s electric vehicles, helping the company reach its goal of all-electric by 203518. The investment helps Lithium Americas fund its projects and shows GM’s belief in its success.

The Thacker Pass mine in Nevada is Lithium Americas’ main project, set to be a top lithium source17. It’s expected to start producing in the mid to late 2020s, making Lithium Americas a key EV supplier19.

The partnership between Lithium Americas and General Motors is a big deal as electric vehicles become more popular19. It ensures GM has a steady lithium supply, helping its EV plans. Lithium Americas gets a strong partner in its goal to lead in the lithium market.

lithium americas stock

Lithium Americas, despite being speculative, is interesting for investors looking at the EV and lithium sectors17. With a partnership with General Motors and promising projects, it’s a company to watch as the world moves towards sustainable transport171819.

Risks and Challenges of Investing in Lithium Stocks

Investing in lithium stocks comes with both ups and downs. The industry is currently seeing a big drop in value, with experts predicting more declines20. This downturn is mainly due to too much lithium being produced, which lowers prices20. Despite the push for electric vehicles and renewable energy, demand for lithium is actually going down20.

Political issues can also affect lithium stocks. Top picks for investing in lithium stocks include Albemarle, Sociedad Quimica y Minera de Chile, Lithium Americas Corp., and EnerSys.13 Starting new lithium production can be very costly and takes years to get going, putting a strain on companies20. Investors should think about these risks when looking into lithium stocks.

Political and Environmental Risks

New companies entering the lithium market are making things more competitive, leading to lower prices20. Environmental rules and concerns are making lithium production more expensive.20 For instance, Chile wants to take control of its lithium, and a big mining project in Serbia was stopped due to environmental protests20.

For now, lithium stocks face short-term challenges with ups and downs in demand20. But, the long-term outlook is good because of the move towards clean energy and electric vehicles20. Yet, investors should weigh the risks and rewards before jumping into lithium stocks.

It’s wise for investors to manage risks by spreading out their investments and picking companies with solid finances.20 Looking into companies that are innovating in lithium, like those working on new extraction methods or recycling batteries, could be a smart move.20 Keeping an eye on market trends and changes in laws is key to making smart choices in lithium investments20.

“Investing in lithium stocks requires a careful and strategic approach, as the industry faces a range of political and environmental challenges that can significantly impact the performance of these investments.”

201321

Diversifying Your Lithium Investment Portfolio

To reduce risks in lithium investments, it’s smart to diversify your portfolio22. You can do this by investing in a lithium ETF, like the Global X Lithium & Battery Tech ETF (LIT), or by choosing several lithium stocks22. This way, you spread your risk across different lithium-related assets, making your investment less vulnerable to the ups and downs of one stock.

Lithium investing helps diversify your portfolio and supports a greener world22. Wars and sanctions can affect a country’s lithium supply, making lithium investments crucial for securing essential materials22. Investing in companies that focus on sustainability can also have a positive impact on the environment and society22.

The lithium market was worth $8.20 billion in 2023 and is expected to grow by 12.8% annually from 2024 to 203023. Demand is set to jump from 508,000 metric tons in 2021 to 3.8 million tons by 2035, thanks to more electric vehicles23. In 2023, electric car sales in the U.S. could hit 1.6 million, a 60% jump from last year, and global EV sales reached 10 million in 202223. These numbers show how crucial lithium is for a sustainable future.

When diversifying your lithium investments, consider ETFs, pre-IPO companies, or physical lithium23. AuAg Funds offers opportunities in sustainable lithium mining companies through funds like AuAg Essential Metals and AuAg Precious Green22.

Diversifying your lithium investments can reduce risks and still offer growth potential in a sustainable future2223.

Lithium Investment Strategies Potential Benefits
Lithium-focused ETFs Diversification, exposure to multiple lithium-related companies
Investing in lithium mining companies Potential for higher returns, exposure to specific lithium projects
Purchasing physical lithium commodities Direct exposure to lithium price movements, potential for price appreciation
Pre-IPO lithium investments Opportunity for higher returns, early exposure to emerging lithium companies

Diversifying your lithium investments can help minimize risks and tap into the growth potential of this key commodity for a sustainable future2223.

Government Support and Policies for Lithium and EVs

The U.S. government has passed laws that help the lithium industry and electric vehicle (EV) sector24. These laws show strong support for moving to electric vehicles. This will likely increase lithium demand and help companies focused on lithium.

US Infrastructure Investment and Jobs Act

The 2021 Infrastructure Act gave $5 billion for EV charging stations25. This money is for building a strong charging network. It’s key for more people to use electric vehicles.

Inflation Reduction Act

The 2022 Inflation Reduction Act helped EVs by offering tax credits and incentives25. These efforts aim to boost electric vehicle demand. This will help the lithium-ion battery market grow.

But, there are hurdles with these policies. For example, the Inflation Reduction Act’s rule about battery origin has raised concerns24. Policymakers might ease these rules for 2024 and 2025. This could help create new U.S. supply chains and increase EV demand24.

The U.S. government is also supporting domestic lithium and mineral production26. This could lessen the need for Chinese refining. It could open new chances for U.S. lithium companies.

“The worldwide lithium-battery market is expected to grow by a factor of 5 to 10 in the next decade, and domestic growth and onshoring of cell and pack manufacturing for lithium-ion batteries will require consistent incentives and support for the adoption of electric vehicles.”26

Overall, U.S. support and policies for lithium and EVs will greatly affect their future growth242526.

Future Outlook for Lithium Demand

The future of lithium looks bright, thanks to the growing electric vehicle (EV) market and more use of energy storage systems27. UNCTAD says lithium demand could jump by over 1,500% by 2050. To hit 2030 net-zero emission goals, we’ll need 70 new mines27. Statista predicts that by 2030, we’ll need over 2.4 million metric tons of lithium carbonate equivalent (LCE), almost double what we expect for 202527.

Role of Energy Storage Systems

Energy storage solutions are key to using more renewable energy, which will boost lithium demand27. Shanghai Metals Markets believes lithium demand will hit 2.4Mt of LCE by 2030. This growth is thanks to better battery production and batteries’ role in renewable energy27.

The lithium market has seen ups and downs, but it’s mostly on an upward trend4. Prices jumped almost sevenfold from 2021 to 2022, then dropped back to 2021 levels by 2024 due to too much supply4.

Government support for EVs and renewable energy also helps the lithium industry4. For example, the 2021 Infrastructure Act gave $5 billion for EV charging in the U.S. President Biden wants EVs to make up half of new car sales by 20304.

The outlook for lithium is strong, thanks to the need for energy storage and more EVs2728.

“The global lithium market size was estimated at USD 31.75 billion in 2023 and is projected to grow at a CAGR of 17.7% from 2024 to 2030.”28

Alternative Lithium Sources and Technologies

The demand for lithium is growing fast, thanks to more electric vehicles on the road29. To meet this need, the industry is looking at new ways to get lithium. This includes using geothermal brines and clay deposits instead of traditional methods.

Direct lithium extraction (DLE) is a new tech that could make getting lithium better for the planet30. Right now, getting lithium involves big ponds that take a long time to work30. But DLE could cut down on land use by a lot and speed up the process, maybe even getting lithium in under a month30.

Using geothermal brines is another new idea30. These are small and not good for old ways of getting lithium30. The new method is cheap and doesn’t need chemicals, making it good for the environment30. Researchers are making this tech better to make it more useful30.

These new ways to get lithium could make the supply chain stronger and lessen the risks of traditional mining29. As investors look for new energy storage options, these new lithium methods could change the game29.

New battery technologies are also being explored to lessen our need for traditional lithium29. Lithium-ion batteries are the main type used, but changing lithium prices are making people look at other options29.

As the lithium industry grows, finding new sources and tech is key to meeting demand302931. Advances in string-based lithium extraction and using geothermal brines and clay are exciting new paths302931.

Lithium Stocks vs. Lithium ETFs

Investors looking at the lithium market have two main choices: lithium stocks or lithium ETFs32. Stocks like Albemarle, Ganfeng Lithium, and Lithium Americas could bring higher returns but also more risk32. ETFs, such as the Global X Lithium & Battery Tech ETF (LIT), offer a way to spread out the risk and gain exposure to the lithium industry.

The LIT ETF manages a big $1.28 billion and has a low 0.75% expense ratio33. It has shown a strong 5-year return of 48% and a 1.57% dividend yield33. In comparison, the Amplify Lithium and Battery Technology (BATT) ETF has a smaller $77.85 million asset base and a 0.59% expense ratio, but its 5-year return is -22.4%33.

Looking at individual stocks, Albemarle Corporation (ALB) has the biggest market value at $117 million, followed by Tesla Inc. (TSLA) and TDK Corporation (TDKCY)32. Panasonic Holdings Corporation (PCRFY) has the highest market price at $276.73, and LG Energy Solution (LGES) is close at $258.9832.

The Global X Lithium & Battery Tech ETF (LIT) is a top choice among ETFs with a big asset base and strong performance34. The iShares Lithium Miners and Producers (ILIT) ETF, launched in 2023, also offers a 1.82% dividend yield33.

Before making a choice, investors should think about their goals, how much risk they can handle, and the market trends323334 Both lithium stocks and ETFs have their pros and cons. A mix of both might be the best way to profit from the growing lithium demand in electric vehicles and energy storage323334.

Conclusion

The lithium industry has seen ups and downs in recent years. Prices and stock values change with supply and demand35. Yet, the future looks bright, thanks to electric vehicles and energy storage needs36. Investors can look into established producers, explorers, or ETFs focused on lithium.

Investing in lithium comes with both chances and risks. A mix of different investments and a long-term view can help manage the ups and downs3536. Albemarle Corporation (ALB) and Lithium Americas (LAC) are top picks by Morningstar35. Hedge funds have also done well, beating the S&P 500 by over 140 percentage points with lithium stocks36.

With electric vehicles and energy storage on the rise, lithium demand is expected to grow36. Investors who understand the market and spread their lithium investments could see big gains in the long run353637.

FAQ

What are lithium stocks?

Lithium stocks are shares of companies that work in the lithium mining, refining, and distribution. This is crucial for making batteries for electric vehicles.

What is the role of lithium in electric vehicle batteries?

Lithium is a key metal for making EV batteries. It’s light, powerful, and lets EVs go far before needing a recharge.

What factors have affected lithium prices and stock valuations?

Lithium prices and stock values have seen big ups and downs. This was due to more EV production during the pandemic, then a drop as high interest rates cut auto sales. Oversupply also played a part.

What are some risks and challenges of investing in lithium stocks?

Investing in lithium stocks has risks like political issues, environmental worries, and big costs to start new lithium projects.

How can investors diversify their lithium investment portfolio?

To diversify, investors can put money into a lithium-focused ETF or pick several lithium stocks. This includes both big names and riskier companies.

How is the U.S. government supporting the lithium industry and the EV ecosystem?

The U.S. government is helping with laws like the Infrastructure Investment and Jobs Act and the Inflation Reduction Act. These laws offer funding and incentives for EV growth and the lithium-ion battery supply chain.

What is the long-term outlook for lithium demand?

The future looks bright for lithium demand. It’s driven by more EVs and using energy storage to support renewable energy.

What are some alternative sources and technologies being explored to meet growing lithium demand?

The industry is looking at new sources and tech. This includes lithium from geothermal brines, direct lithium extraction, and clay deposits to diversify the supply chain.

How do lithium stocks compare to lithium ETFs as investment options?

Investing in lithium stocks might offer bigger returns but comes with more risk and ups and downs. A lithium ETF gives broad exposure to the lithium industry, reducing some risks of picking stocks.

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