For the past two years, investors have treated artificial intelligence as a technology story.
If you wanted exposure to the AI boom, you bought Nvidia (NVDA). Maybe Microsoft. Perhaps Broadcom or AMD. The winners all seemed to make chips, servers, or software.
Caterpillar (CAT) just proved that wrong.
The construction-equipment giant reported one of the strongest earnings surprises of the quarter on Aug 4, posting record revenue of $20.54 billion and adjusted earnings of $8.17 a share, crushing Wall Street expectations. The stock jumped roughly 10%, adding hundreds of points to the Dow Jones Industrial Average as investors digested the results.
The numbers were wonderful in themselves.
And the reason they do it may be even more essential.
Chief Executive Joe Creed said demand across Caterpillar’s businesses continues to rise, underpinned by solid order rates and a growing backlog. Data center construction has become a major driver on Wall Street and a favored investment theme.
“Strong order rates and a growing backlog reflect broadening momentum across all three of our primary segments,” CEO Joe Creed said while discussing quarterly results.
Artificial intelligence does not stop at Nvidia chips.
An AI data center requires land clearing, foundation pouring, generator installation, power system construction, and heavy machinery to function around the clock. That’s billions in cash going to companies that don’t often make AI stock rankings.
It was a significant reminder for investors, as it was for Caterpillar’s quarter.
The AI economy is rewarding more than just the corporations building the technology. The corporations who physically develop the infrastructure behind it are being rewarded ever more.
AI’s biggest winners are moving beyond Silicon Valley
Investors, when they think about AI infrastructure, tend to think of chips.
That’s a good point.
The big language models are still powered by graphics processors from Nvidia, while others such as AMD, Broadcom, and Marvell are competing to supply the CPUs and networking equipment needed inside huge processing clusters.
More AI:
- Nvidia just made a move Wall Street wasn’t ready for
- Microsoft just took sides in AI policy fight
- OpenAI just disclosed something genuinely alarming
But someone has to build the facilities before any processor can be installed.
Hyperscale data centers are huge earthmoving projects, including digging, diesel generators, backup power systems, and heavy construction equipment. It may be months or years before servers begin to handle AI workloads for those projects.
And that change is starting to show up in Caterpillar’s financial performance.
The company said revenue climbed 24% year over year to a record $20.54 billion, while adjusted earnings surged to $8.17 a share. Analysts had expected about $18.95 billion in revenue and earnings closer to $6.10 per share.
The profits beat wasn’t just about AI.
The mining, energy, and broader infrastructure spending is still supporting demand.
But data center development has become a more essential growth driver, especially as Microsoft, Amazon, Alphabet, Meta, and other tech titans continue spending tens of billions of dollars to expand AI capacity.
For Caterpillar, that means more excavators, loaders, engines, and power generation equipment for some of the world’s largest construction projects.
Related: BofA sees more power behind Caterpillar shares
The result is a different way of thinking about artificial intelligence investing.
Instead of asking which company builds the fastest chip, investors may increasingly ask who profits every time another AI campus breaks ground.
That list is becoming much longer.
- Heavy equipment manufacturers.
- Industrial suppliers.
- Power companies.
- Electrical equipment makers.
- Cooling-system providers.
- Engineering firms.
The AI boom is spreading through the industrial economy.
Bloomberg / Getty Images
Caterpillar’s results may change how investors think about AI
Much of the AI surge, for investors, was virtually exclusively concentrated on semiconductor businesses.
That approach has delivered remarkable gains as Nvidia has become one of the world’s most valuable businesses.
But the new earnings season implies the investing story could be broadening.
Building the infrastructure for AI involves huge amounts of capital spending, and not only on chips and servers. Before you ever get to installing computing equipment, data centers need roads, foundations, generators, electrical systems, cooling equipment and heavy machinery.
Key takeaways
- Caterpillar reported record quarterly revenue of $20.54 billion.
- Adjusted earnings reached $8.17 per share, well above Wall Street estimates.
- Management cited strong order rates and a growing backlog across its business.
- AI data-center construction is emerging as a meaningful demand driver for heavy equipment.
- Caterpillar shows that industrial companies are increasingly participating in the AI investment boom.
Caterpillar is at the head of that investment cycle.
Strong quarterly results demonstrate the advantages of technology spend for industrial firms without creating AI software or manufacturing sophisticated processors.
The company’s gains of nearly 60% this year show rising investor optimism that spending on AI infrastructure might be a big growth driver for years to come.
That doesn’t imply Caterpillar is a tech firm all of a sudden, though.
Instead, it shows that one of Wall Street’s largest investment themes is creating opportunities across businesses that were a world away from AI before.
Caterpillar’s earnings served as a key reminder for investors seeking the next phase of the artificial intelligence play.
The biggest winners might not be stuck in Silicon Valley anymore.
Some may be feeding the machines that will develop Silicon Valley’s future.
Related: Caterpillar buys little-known AI startup in surprise tech move
