Caterpillar Inc.

(New York Stock Exchange)
Back to all articles
Somewhat Bullish +35

Caterpillar Sinks Another 6%, Vertiv Down 14%, Quanta Down 12% as AI Selloff Spreads to Industrials

Market commentary AI-generated analysis

πŸ“‰ Caterpillar shares dropped 6% today as an AI-driven selloff spread from chip stocks to industrials, causing investors to re-evaluate the company's data-center exposure.

πŸ’° The stock decline brought Caterpillar's forward P/E ratio down to approximately 19x, aligning it with its five-year average after a peak of 42x in June.

πŸ“ˆ Analysts expect normalized earnings per share to roughly double from $19.06 in 2025 to $38.77 by 2028, maintaining strong long-term growth expectations.

⚑ Power generation contributed $10.3 billion to Caterpillar's 2025 sales and revenues, representing 15% of total revenue and serving as the primary link to the AI trade.

πŸ“¦ The company reported a record backlog of $78 billion in the third quarter, with turbine orders extending into 2030.

⚠️ Policy risks persist as states like Texas have paused air permits for data-center projects, which could impact future power order growth.

πŸ—οΈ Construction segment supplied $1.21 billion of the $1.84 billion rise in segment profit during the first half of 2026.

πŸ“Š The third-quarter earnings report did not move analyst consensus estimates, indicating stability in Wall Street's outlook despite the stock price drop.

Bullish Signals
  • Analysts maintain strong long-term growth expectations with normalized EPS projected to double from $19.06 in 2025 to $38.77 by 2028.
  • Caterpillar holds a record backlog of $78 billion in the third quarter, demonstrating robust order intake extending into 2030.
  • The company's forward P/E ratio has corrected to 19x, which is right at its five-year average, potentially offering value relative to its June peak of 42x.
  • Construction segment delivered strong performance, supplying $1.21 billion of the $1.84 billion rise in segment profit in the first half of 2026.
Risk Factors
  • Caterpillar shares fell 6% today as investors sold the stock as a data-center play despite its diversified business model.
  • Policy risks are real, with states like Texas pausing air permits for data-center projects which could impact future power orders.
  • The company's valuation has compressed significantly from a peak of 42x forward earnings in June to approximately 19x today.
Full Analysis
Caterpillar (CAT) shares fell 6% today as a broader AI-driven selloff spread from chip and storage stocks to industrials, causing investors to treat the company as a data-center play despite its diversified business. The decline pushed Caterpillar's forward price-to-earnings ratio down to approximately 19x, which is right at its five-year average, after peaking at 42x in June. Despite the stock drop, analysts maintain strong long-term growth expectations for the company. Consensus normalized earnings per share are projected to roughly double from $19.06 in 2025 to $38.77 by 2028. These estimates remained largely unchanged following the third-quarter report, suggesting that Wall Street views the recent price action as a potential overreaction rather than a fundamental deterioration. Caterpillar's exposure to the AI trade is primarily through its power generation segment, which accounted for $10.3 billion of total 2025 sales and revenues, or 15%. The company holds a record backlog of $78 billion in the third quarter, with turbine orders extending into 2030. However, policy risks remain, as some states like Texas have paused air permits for data-center projects, potentially impacting future power orders. The article highlights that while chip names rely heavily on data-center spending, Caterpillar's business model is broader. Investors are currently pricing in a lower valuation multiple compared to the summer peak. The upcoming fourth-quarter report in late January will provide critical insight into whether power orders are holding up amidst regulatory headwinds.