Caterpillar's Data Center Bet: A Quiet Risk to Stock Growth

Caterpillar's stock price has risen 94% over the past year, outperforming the S&P 500. However, there is a quiet risk that could impact this run: data center demand.

The company's Power & Energy segment saw sales grow 72% in the second quarter of 2026, driven by strong demand for large gensets and turbines used in data centers. This growth has led to Caterpillar adding factory capacity, but analysts are questioning whether the demand will last through 2030.

Customers are placing orders as far out as 2030, with lead times on gas prime power running toward the back half of 2028. The company is converting a work-tools facility in Wamego, Kansas to package PGM130 modules and restarting a mothballed gas engine platform, but the question remains whether this demand will continue.

If data center orders cool before the capacity pays back, growth could fall short of what the price assumes. At $805, the share price implies revenue growth of roughly 17.4% a year over several years, which is in line with the current trajectory.