Caterpillar: The Unlikely AI Stock with 72% Growth

Oct 24, 2026

Bobby Quant Team

💡 Key Takeaway

Caterpillar's power generation segment is booming thanks to AI data centers, making it a diversified way to invest in the AI megatrend.

Caterpillar's Power Generation Sales Skyrocket on AI Demand

Caterpillar (CAT) reported strong second-quarter results, with total revenue up 24% year-over-year and earnings per share soaring 73%. While the company is known for its yellow construction and farm equipment, a less visible segment is driving growth: power generation.

Retail sales of power generation equipment jumped 72% in the quarter, fueling a 33% increase in the power and energy segment. CEO Joseph Creed attributed the surge to 'very strong demand for large generator sets and turbines used in data center applications.'

AI data centers are power-hungry, consuming about 4.9% of U.S. electricity in 2025, with projections to more than double by 2030. This insatiable demand is benefiting Caterpillar, which now has a record backlog of $72 billion, up 92% over the past year, with orders extending through 2030.

Caterpillar will report Q3 earnings on Oct. 29, and Wall Street expects revenue growth of 17% and EPS of $7.03, up 42% year-over-year. Given the momentum, Caterpillar could easily beat those estimates.

What This Means for Me

If you hold CAT, this news reinforces the bull case, as the AI-driven power generation growth adds a new dimension to the investment thesis. Investors with exposure to core AI stocks like NVDA, GOOGL, or MU might consider diversifying into CAT to reduce concentration risk while still benefiting from AI trends. However, be mindful of Caterpillar's cyclical exposure to construction and mining, which could offset some gains in a downturn.

Why Caterpillar's AI Connection Matters for Investors

Caterpillar's transformation into an AI play offers investors a way to diversify away from core AI stocks like Nvidia, Alphabet, and Micron while still capitalizing on the AI infrastructure build-out. As data centers proliferate, the demand for reliable power solutions is critical, and Caterpillar is a key supplier.

The power generation segment is now Caterpillar's largest and fastest-growing, and the record backlog provides strong revenue visibility for years. This reduces the cyclicality typically associated with Caterpillar's construction and mining businesses.

Moreover, the AI-driven demand for power is a secular trend that is likely to persist, giving Caterpillar a long runway for growth. As the company continues to innovate and expand its power solutions, it could command a higher valuation multiple, similar to other AI beneficiaries.

However, investors should note that Caterpillar is not a pure-play AI stock; its other segments could face headwinds from economic cycles. But the power generation story is compelling and could drive significant upside.

Stock to Watch

Stocks	Impact	Analysis
CAT	Positive	Caterpillar's power generation segment is growing rapidly due to AI data center demand, with a record backlog providing strong revenue visibility. The company is well-positioned to benefit from the multi-year AI infrastructure buildout.
NVDA	Neutral	Nvidia remains a core AI stock, but Caterpillar offers a diversified way to invest in AI. Nvidia's sentiment is neutral as the article focuses on indirect AI beneficiaries.
GOOG	Neutral	Alphabet is mentioned as a core AI stock for comparison. No specific sentiment drivers are discussed, so impact is neutral.
GOOGL	Neutral	Alphabet is mentioned as a core AI stock for comparison. No specific sentiment drivers are discussed, so impact is neutral.
GOOGN	Neutral	Alphabet is mentioned as a core AI stock for comparison. No specific sentiment drivers are discussed, so impact is neutral.
MU	Neutral	Micron is mentioned as a core AI stock for comparison. No specific sentiment drivers are discussed, so impact is neutral.

Source: The Motley Fool
Analysis generated by Bobby AI quantitative model, reviewed and edited by our research team. This is not financial advice. Always do your own research before making investment decisions.