How Caterpillar is becoming an AI play amid data center boom
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A Caterpillar generator. Photo: Paul Taggart/Bloomberg via Getty Images
Caterpillar — which formed decades before computers and nearly a century before ChatGPT — is becoming an AI play.
Why it matters: The equipment maker is enjoying a sales boom from the surge in development of AI data centers and power plants.
Driving the news: Caterpillar on Thursday recorded a 22% increase in revenue, compared with a year earlier, to $17.4 billion.
- That crushed S&P Capital IQ estimates of $16.4 billion.
- It included a 38% increase in construction industry revenue and a 22% rise in its power and energy segment.
Between the lines: Much of Caterpillar's growth in power and energy is being driven by data center demand and the electricity needed to support cloud computing and generative AI, CEO Joe Creed said on an earnings call.
- Caterpillar makes the engines and turbines that supply both primary and backup power to those facilities, as well as the electrical infrastructure to run them.
Zoom in: Creed said Caterpillar has accumulated a "record" backlog in orders.
- The backlog totaled $63 billion, up 79% from a year earlier.
- "Customers are committing to longer-term orders with some orders well into 2028," Creed said.
Caterpillar is also investing to keep up with demand.
- "The data centers are trying to move quickly," Creed said, when asked about the timeline for the company's plan to increase large engine production. "We're going to start right away."
The impact: CAT is the second-largest component in the Dow Jones Industrial Average, representing more than 10% of the index, according to Bespoke Investment Group.
- The stock closed up 10% Thursday, contributing to a 790-point rise in the Dow.
Our thought bubble: The AI economy continues to translate into demand for actual stuff like Nvidia chips and Caterpillar machines.
- That's making it increasingly difficult to argue the AI boom is a mirage.
What we're watching: The Iran war brings near-term risks for Caterpillar but "could provide green shoots for 2027" if it leads to a surge of new energy projects, Bank of America analyst Michael Feniger wrote in a research note.
