Caterpillar Says AI Power Drives Growth More Than Bulldozers

A Caterpillar Inc. diesel power generator in East Peoria, Illinois.

(Bloomberg) -- Caterpillar Inc., the company synonymous with yellow bulldozers and mining trucks, is getting a boost from another type of machinery.

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Power generators and turbines, which keep data centers running, have become a dominant driver for the company as demand for artificial-intelligence infrastructure takes off globally. Caterpillar told investors on Wednesday that sales of those products jumped 31% in its latest quarter, trouncing sales growth for its more traditional equipment.

The stock surged as much as 14%, to a record high.

It’s an example of how the AI fervor that’s fueled Nvidia Corp.’s rise to become the world’s first $5 trillion company is also lifting the fortunes of more traditional industrial players.

For instance, shares of ProPetro Holding Corp., a West Texas oil contractor, soared an eye-popping 44% Wednesday after saying it was expanding its business to supply electricity to data centers. It is the biggest single-day jump on record for the company, which has traditionally focused on fracking oil and gas wells.

For Caterpillar, the boom in data center construction has transformed a once-sleepy segment of its business. Its so-called Energy & Transportation unit, which sells generators and related machinery, used to lag the firm’s other two divisions. But now that unit, which also sells equipment to oil producers and rail services, has become the company’s largest and fast-growing, accounting for about 40% of the firm’s total revenue last year.

In quarterly earnings on Wednesday, Texas-based Caterpillar said that sales within the unit increased 17% year-over-year. And some analysts are expecting revenue from the unit to double, or even triple, in the coming years.

It’s “a great illustration of the macroeconomic trends manifesting at the microeconomic level,” said Michael O’Rourke, chief market strategist at JonesTrading. “It has been well advertised that the AI data center buildouts have been key drivers of GDP growth this year. That comes through in the Caterpillar earnings with the strong demand in its Power Generation business.”

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