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    Is AI-Fueled Data Center Engine Demand Altering The Investment Case For Caterpillar (CAT)?

    Simply Wall St·01/05/2026 05:24:44
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    • Caterpillar recently delivered a strong quarter, with revenue rising 9.5% year on year and earnings surpassing analyst expectations as demand held firm across its core segments.
    • An important development is the rapid growth of its power and energy unit, where AI-driven data center projects are prompting a US$725 million capacity expansion at its Lafayette, Indiana engine plant.
    • Now we’ll explore how the accelerating AI-driven power demand highlighted in this news shapes Caterpillar’s broader investment narrative and outlook.

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    Caterpillar Investment Narrative Recap

    To own Caterpillar, you need to believe that long term demand for heavy equipment and energy solutions will support its earnings power despite tariff and macro uncertainties. The latest quarter’s solid revenue growth and AI driven power demand reinforce the near term earnings catalyst, while tariff headwinds and pricing pressure in core construction and resource equipment remain the key risks that this news does not fundamentally resolve.

    The US$725 million capacity expansion at the Lafayette, Indiana engine plant ties directly to the fastest growing power and energy unit, underpinned by AI related data center demand. This sits alongside Caterpillar’s ongoing dividend commitments, suggesting management is balancing investment in growth opportunities with continued capital returns, both of which feed into how investors assess the durability of its earnings base.

    Yet against this AI fueled opportunity, investors still need to weigh the potential impact of significant new tariffs that could...

    Read the full narrative on Caterpillar (it's free!)

    Caterpillar's narrative projects $74.0 billion revenue and $13.5 billion earnings by 2028.

    Uncover how Caterpillar's forecasts yield a $587.67 fair value, in line with its current price.

    Exploring Other Perspectives

    CAT 1-Year Stock Price Chart
    CAT 1-Year Stock Price Chart

    Sixteen members of the Simply Wall St Community currently see Caterpillar’s fair value between US$291.79 and US$587.67, reflecting a wide spread of expectations. As you weigh those views, consider how concentrated AI driven power demand might interact with tariff and pricing risks for the company’s future performance.

    Explore 16 other fair value estimates on Caterpillar - why the stock might be worth less than half the current price!

    Build Your Own Caterpillar Narrative

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    This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.