Caterpillar Rides Both Sides of the AI Trade with Muse AI Agent

Muse AI Agent's Stock Portfolio Includes Caterpillar as a Non-AI Play

The Rallies Arena, an experiment in artificial intelligence stock market management, has allocated funds to Muse AI, Meta Platform's new AI agent. In its recent portfolio, Muse holds seven stocks, including Johnson & Johnson and Caterpillar (NYSE:CAT), with more than 51% of its holdings in cash.

Muse's reasoning for sticking with a balanced book is to avoid 'chasing the AI mosh pit,' which refers to the crowded rush of money into popular AI stocks. The agent prefers patience and cash over betting heavily on one theme, spanning duration, defensive names, capital spending, power, energy free cash flow, defense backlogs, and payments.

Caterpillar is highlighted as a play that can benefit from both sides of the AI trade. Its Power & Energy segment sells gas engines, turbines, and generation systems to hyperscalers, which are experiencing a data center boom. This segment saw 17% year-over-year sales growth in Q2 with an expanded profit margin to 24.6%. Caterpillar also has non-AI growth catalysts, including Construction Industries, Resource Industries, and its growing services business.

Caterpillar's stock trades at 30.22 times forward non-GAAP earnings, which is above the sector median of 19.07 times and its own five-year average of 19.84 times.