Caterpillar (CAT) — Quietly Becoming One of the Most Unexpected AI Winners
Caterpillar trades around $549, and after digging through the latest data, we think this industrial giant has more going on beneath the surface than most investors realize. The story here is shifting in ways that don’t show up in the usual “construction equipment” narrative, and that’s exactly why it deserves fresh attention.
One of the biggest developments is the growing demand for on-site power solutions as hyperscalers search for ways to reduce their dependence on the grid. Turbines are suddenly back in focus, and Caterpillar is positioned right in the middle of this trend. Over the past year, large AI-driven projects such as xAI, Stargate and Meta’s next-gen data buildouts have all moved forward with permits that highlight turbine adoption as a key piece of their strategy. That’s not a coincidence. AI infrastructure requires reliable, scalable power, and Caterpillar is uniquely equipped to provide it.
There’s also a clear shift underway in the core equipment cycle. North American machine inventories have fallen roughly 10% year over year, which implies current deliveries are running behind actual demand. Historically, used equipment inventories tend to lead both resale values and Caterpillar’s stock performance. With used inventories tightening and new inventory levels back to historical averages, pricing power is beginning to turn upward again. That matters because stronger resale values typically support healthier margins on new equipment.
Caterpillar’s internal price and cost structure is also improving, giving the company a tailwind heading into next year. When all of this lines up at the same time — strengthening demand, improving pricing conditions, tightening inventories, and a new AI-driven power angle — it creates a rare setup where an established industrial name becomes a legitimate growth opportunity.
Wells Fargo recently launched coverage with an Overweight rating and a $675 price target, implying about 22% upside from Thursday’s close. We agree that the market hasn’t fully priced in Caterpillar’s expanding role in AI infrastructure or the improving equipment cycle that’s now underway.
For long-term investors looking beyond the usual tech names, Caterpillar is becoming a surprisingly strong way to tap into AI’s physical build-out — and that makes the current level look appealing.
