To investigate the stability and electrical and physical properties of undoped CuO and CuO doped with rare earth elements, electronic structures and elastic constants were calculated using first-principles density functional theory. Additionally, experimental verification was carried out on AgCuO and AgCuO-X (La, Ce, Y) electrical contacts, which were prepared using sol–gel and powder metallurgy methods. The contacts were tested under an 18 V/15 A DC resistive load using the JF04D contact material testing system. Arc parameters were analyzed, and three-dimensional surface profilometry and scanning electron microscopy were used to study the altered erosion morphology of the electrically contacted materials; moreover, the potential mechanisms behind their arc erosion behavior were investigated in depth. The results demonstrate that the doping of rare earth elements can improve the electrical conductivity and physical properties of the contacts, optimize the arc parameters, and enhance their resistance to arc erosion. Notably, AgCuO-Ce exhibited the highest electrical conductivity and the least amount of material transfer; moreover, it had excellent arc time and energy parameters, resulting in the best resistance to arc erosion. This study provides a theoretical basis for the screening of doping elements to enhance the performance of AgCuO contact materials and offers new ideas and scientific references for this field.