Caterpillar Rises to Top of AI Trade

Caterpillar has emerged as a dominant player in the AI trade, beating analyst estimates and crushing it in the market. The company's AI-enabled power and energy unit is now its biggest source of revenue, overtaking traditional segments like tractors and farm equipment.

The stock surged 13% before finishing 6% higher, bringing Caterpillar's year-to-date gain to 53%. This dominance is a long-term trend, with the company being the best performer in the Dow since 2025, posting a 142% surge over that period.

Caterpillar's appeal lies in its non-AI components, including construction, mining, and oil and gas. Even if AI demand cools, the company has other ways to grow its business.

Wall Street has taken notice, with 16 buy ratings, 11 holds, and zero sells, and an average 12-month price target seeing 14% upside from Tuesday's close, according to Bloomberg data.