How CAT Stock – An Old-School Industrial – Became An AI Darling

How a company famous for bulldozers plugged into the tech boom and left the market in its dust.

If you had to guess the stock that rode the artificial intelligence wave to a 150% gain over the last year, you might not pick the hundred-year-old company that makes giant yellow tractors. And yet, here we are.

While the S&P 500 ambled to a respectable 24.3% gain, Caterpillar (CAT) spent the past twelve months absolutely crushing its industrial peers, leaving Deere’s 12.1% return looking like a rounding error. The story of this surge isn’t found in a cornfield or a copper mine. It’s in the one place you might never look: the server farm.

From Dirt To Data Centers

The AI revolution runs on electricity. Lots of it. And data centers require a bulletproof power source. That’s where Caterpillar came in. Over the past year, the market woke up to the fact that CAT’s Power and Energy division was becoming a critical supplier to the tech industry. In its most recent quarter, sales to users in this segment grew a robust 32%, with the power generation part rocketing up 48%, driven by what the company called “strong demand for large gensets and turbines used in data center applications.” This wasn’t a fluke; it was a fundamental shift in the company’s end markets.

A Backlog That Bends Steel

This new demand isn’t just a trickle; it’s a flood. Caterpillar’s backlog swelled to a record level of $63 billion, a 79% jump from the year before. First quarter orders hit an all-time record. This isn’t about fulfilling next month’s orders. As CEO Joe Creed noted, “Customers are committing to longer-term orders with some orders well into 2028.” That kind of visibility is rare, and it’s what re-rated the stock.

But while the data center business was booming, other parts of the company felt the strain. The Resource Industries segment, which serves miners and quarries, saw its margin fall by 700 basis points to 10.0% in the first quarter. That’s a serious squeeze, and it points to the central question hanging over this incredible run.

With a sales pipeline this full, can Caterpillar actually make more money on each yellow machine it sells?

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