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Caterpillar Crosses $300 Billion in Market Value on AI Rally
Investors Are Hungry for Secondary AI Plays
Caterpillar Inc. shares extended a turbocharged rally fueled by bets on the industrial giant’s artificial intelligence prospects to push its market valuation above $300 billion for the first time.
The company, known for its iconic yellow construction and mining equipment, saw its stock rise as much as 2.4% Jan. 13 to a high of $644.59. The stock has gained 12% this year and is among the best percentage gainers in the S&P 500 Industrials Index — which has itself outperformed the broader market.
Because of its business selling power-generation equipment, Caterpillar has been arunaway winnerin a market where investors are hungry for secondary AI plays after the valuations of major technology and semiconductor companies soared.
Exuberance around data-center-driven demand for power generation has helped the company “support a record backlog,” Bloomberg Intelligence analyst Christopher Ciolino said. “Power generation is the fastest growing part of their business, with above average visibility, and they are adding a lot of capacity to meet this insatiable demand.”
The Irving, Texas-based company’s position as a major manufacturer also benefits its stock against a strong economic background.
Investors are buying into economically sensitive stocks after a report last month showed U.S. growth has been stronger than expected, said Steve Sosnick, chief strategist at Interactive Brokers.
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Caterpillar “has been a key beneficiary,” Sosnick said. “The reaction to the report was a bit delayed, probably thanks to portfolio managers’ vacation schedules, but it is clear that the move to cyclicals, industrials and other economically sensitive stocks began in earnest last week.”
Economic optimism has allowed the stock to advance even as a rally in other power equipment names takes a breather. Caterpillar has bounced back from a pullback last month, leaving behind peers such as GE Vernova Inc. and Vertiv Holdings Co.
Wall Street is currently watching the markets where the company first made its name, many of which have been mired in downturns. Caterpillar “should see cyclical upside” this year in sectors including mining and construction, Jefferies analyst Stephen Volkmann told clients last month.
