This Industrial Giant Is Becoming an AI Powerhouse, and You Probably Had No Idea
Key Points
Companies are building data centers faster than the electrical grid can keep up.
Caterpillar is solving this and making a ton of money in the process.
With no end in sight to the data center boom, Caterpillar is poised to continue winning.
Many investors know Caterpillar (NYSE: CAT) well. They may have grown up seeing model toys in Caterpillar's famous yellow, or even actual trucks, bulldozers, and other machinery roadside at construction projects. The industrial equipment giant is an iconic brand and a blue chip company that has raised its shareholder dividend for 33 consecutive years.
Wait, you probably clicked on this article to read about an AI stock. No, you're not mistaken. It turns out, Caterpillar is quickly becoming an AI powerhouse -- it's just not for semiconductors, software, or the other familiar reasons.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Here's why AI has become a tremendous growth catalyst for Caterpillar, and why investors should consider buying and holding the stock.
Image source: Getty Images.
Solving the data center bottleneck that many people forget about
You probably know that companies can't set up data centers fast enough these days. But fewer people are thinking deeply about a very simple problem: power.
It takes far less time to churn out GPU chips or construct buildings than it does to plan, approve, and build the infrastructure needed to power all of these data centers. I'm talking about power generation, substations, power lines, and more.
That is where Caterpillar has found a very lucrative opportunity. The company's power and energy segment sells industrial-scale generators, battery systems, switchgear, and other products that can generate and distribute power on-site while the electrical grid catches up.
The business is booming, which bodes well for the stock
Revenue in the power and energy segment grew by 23% year over year in the fourth quarter of 2025 to become Caterpillar's largest business. The strong demand helped Caterpillar end 2025 with a $51 billion order backlog, up a blistering 71% from the year before.
Soaring equipment sales will generate recurring service and maintenance revenue, and the tailwinds could persist for a long time. Management cites estimates that data center electricity requirements will rise by 200% by 2035.
Caterpillar stock has already done very well, more than doubling over the past year. Shares aren't a bargain at 31 times this year's earnings estimates, but that seems fair for the 18% annual earnings growth Wall Street analysts anticipate over the next three to five years.
Even more, the strong growth will likely translate to the dividend, which is currently just 26% of 2026 earnings estimates. Those looking for a different way to invest in the AI boom and a proven winning company with a reliable dividend that will continue to increase over time should take a close look at Caterpillar.
Should you buy stock in Caterpillar right now?
Before you buy stock in Caterpillar, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Caterpillar wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $501,381!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,012,581!*
Now, it’s worth noting Stock Advisor’s total average return is 880% — a market-crushing outperformance compared to 178% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
*Stock Advisor returns as of April 1, 2026.
Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Caterpillar. The Motley Fool has a disclosure policy.
