Deere & Company

(New York Stock Exchange)
Back to all articles
Neutral 0

Caterpillar Falls 4% While Deere Edges Higher: Is the Data Center Power Trade Unwinding?

AI-generated analysis

πŸ“‰ Caterpillar shares dropped 4% to $783.15 as investors reacted to weekend warnings from OpenAI and Anthropic CEOs regarding a potential slowdown in AI model development.

⚑ Power generation sales to users grew 72% in Q2 2026, driven by strong demand for large reciprocating engines and turbines for data center construction.

πŸ“… Caterpillar holds a massive $72 billion backlog with orders booked into 2029 and 2030, suggesting the recent decline is a momentum unwind rather than a demand collapse.

🀝 CEO Joe Creed confirmed on the August earnings call that customers have not backed off of demand despite the shifting AI narrative.

πŸ†š Deere & Company (DE) rose 1% to $684.25, highlighting its lack of exposure to the AI data center power trade compared to Caterpillar.

πŸ“Š The Industrial Select Sector SPDR ETF (XLI) fell 2%, with Caterpillar acting as a heavy anchor weight in the broader industrial selloff.

πŸ’‘ Analysts suggest sizing exposure to Caterpillar around its durable backlog rather than assuming indefinite AI infrastructure buildout is prudent given recent market shifts.

Bullish Signals
  • Deere & Company shares edged higher 1% to $684.25, driven by strong fiscal Q3 2026 GAAP EPS of $5.10 and a raised full-year net income guidance range of $4.75 billion to $5 billion.
  • Deere stock has gained 48% year to date, significantly outperforming the broader industrial fund which is up only 10% for the year.
Risk Factors
  • While Deere performed well, the article notes a divergence in industrial peers where Caterpillar's sensitivity to AI narrative shifts contrasts with Deere's agricultural and construction equipment focus.
Full Analysis
Caterpillar Inc. (NYSE: CAT) shares fell 4% to $783.15 on Monday, leading the industrial sector lower as investors reacted to a potential unwind in its AI data center power trade. The decline was driven by weekend comments from OpenAI and Anthropic CEOs suggesting a slowdown in AI model development, which threatens the sustained demand for power generation equipment that has fueled Caterpillar's recent re-rating. Despite the stock price drop, Caterpillar maintains a robust $72 billion backlog extending into 2029 and 2030. Power generation sales to users grew 72% in Q2 2026 due to data center construction demand, and CEO Joe Creed stated that customers have not backed off their orders. Analysts view the Monday selloff as a momentum correction linked to the AI narrative rather than a collapse in actual underlying demand or order book health. In contrast, Deere & Company (NYSE: DE) rose 1% to $684.25 and Paccar (NASDAQ: PCAR) remained largely unchanged. The divergence highlights that Caterpillar is the only major industrial peer with significant exposure to AI data center power generation. While Deere reported strong fiscal Q3 2026 earnings and raised full-year guidance, Caterpillar's stock performance remains sensitive to shifts in the broader AI infrastructure buildout expectations. The Industrial Select Sector SPDR ETF (XLI) dropped 2%, with Caterpillar acting as a primary weight dragging down the index more than the broad market. Investors are now advised to weigh whether sizing exposure around Caterpillar's durable backlog is a sturdier posture than assuming a straight-line power buildout, given the recent shift in the AI investment narrative.