Caterpillar's AI Play: A Rare Combination of Industrial Value and Generational Growth

Caterpillar, the largest global construction and mining equipment manufacturer, has been quietly emerging as an AI dark horse. Founded in 1925, the company serves various sectors, including infrastructure, mining, oil and gas, rail-related products, engines, and backup power solutions. Caterpillar also operates Cat Financial, which provides customer financing, equipment loans, heavy equipment insurance, and operating leases.

The company entered the artificial intelligence business in 2018, focusing on autonomy, physical AI, and AI models. Caterpillar benefits from the AI boom in several ways. Firstly, its turbines, generator sets, and microgrids are likely to be in demand for energy, which is currently the biggest bottleneck of the AI revolution.

Secondly, Caterpillar was an early-mover in the industrial autonomous revolution. The company already has a global fleet of over 800 autonomous mining trucks, with more to come. Additionally, Caterpillar sells the machinery needed to dig up raw materials for the AI supply chain, such as copper, steel, concrete, and silver.

Caterpillar has a record $72 billion order backlog, soaring 92% year-over-year. Zacks Consensus Analyst Estimates expect Caterpillar to grow earnings at a mid-double-digit clip through 2027. The company consistently beats Wall Street expectations, surpassing Zacks Consensus Estimates for four consecutive quarters with an average surprise of 18.12%.