Should You Buy Caterpillar (CAT) Amidst The Data Center Build Out?

Caterpillar Inc. (NYSE:CAT) is one of Billionaire Ken Fisher’s Latest Portfolio: 10 Best Stocks to Buy.

Agricultural, construction, and power generation equipment manufacturer Caterpillar Inc. (NYSE:CAT)’s shares are up by 165% over the past year and by 55% year-to-date. The artificial intelligence boom has also proven to be a boon for the firm’s power generation products. For instance, ProPetro Holding Corp announced an agreement with Caterpillar Inc. (NYSE:CAT) to purchase power generation assets capable of generating up to 2.1 billion gigawatts of power over the next five years.

Caterpillar Inc. (NYSE:CAT)’s forward P/E ratio of 31.35 is higher than the machinery sector’s average of 24.06. Evercore ISI discussed the firm on May 11th as it raised the share price target to $1,103 from $878 and reiterated a Buy rating on the shares.

CNBC’s Jim Cramer discussed Caterpillar Inc. (NYSE:CAT) and its multiple in his May 15th appearance on Mad Money:

“So let’s go to our game plan for next week…. Monday’s Caterpillar, this division, okay, it’s integral to data center construction, and it’s hosting a headquarters visit for investors right now. CAT trades at 36 times earnings. It’s like a tech stock. Oh, you know, I like CAT, but this has become overheated. If this division, well, this division has everybody excited. Perhaps it merits the premium. We have to find out.”

While we acknowledge the potential of CAT as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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