Caterpillar Stock Jumps. Its AI Potential Is Bigger Than You Think.

Caterpillar stock could also be an AI play. (Courtesy Caterpillar)

Key Points

• Caterpillar’s power business, which supplies generators for AI data centers, could add over $10 to earnings per share over three years.
• JPMorgan forecasts a double-digit percent annual sales increase for Caterpillar’s Energy and Transportation segment from 2026 to 2028.
• Caterpillar’s stock was up approximately 39% year to date and 28% over the past 12 months, driven by construction and mining markets.

Artificial intelligence has its tentacles in many sectors of the economy beyond big tech, including heavy machinery.

That’s good news for Caterpillar . While the company makes a lot of machines for moving earth, it also makes generators that can provide backup power for AI data centers. That business has caught the attention of some analysts, who say data center growth is a positive for Caterpillar.

Just how big a positive is still up for debate. JPMorgan analyst Tami Zakaria took a stab at sizing the opportunity in a Tuesday report.

“We estimate a potential for greater than $10 incremental earnings per share in the base case over the next three years, with capacity constraints the gating factor,” Zakaria wrote.

That is no small change. Cat is expected to earn about $72 a share over the next three years, according to FactSet. AI represents a near-15% boost.

Caterpillar’s power business is part of its Energy and Transportation segment that generated second-quarter 2025 sales of $7.8 billion, out of Cat’s total sales of $16.6 billion. Sales in that division grew 7% year over year.

Zakaria sees “the potential for a double-digit percent annual sales tailwind for CAT’s E&T segment between 2026 and 2028,” based on the JPMorgan’s outlook for data-center power demand and pricing, among other factors.

She rates Caterpillar stock Buy and raised her price target to $650 from $505 a share. That’s the highest target price on Wall Street, according to FactSet, matched by Rob Wertheimer at Melius Research.

Cat shares gained 4.5% on Tuesday, closing at $527.47, while the S&P 500 fell 0.2% and the Dow Jones Industrial Average gained 0.4%.

Overall, 50% of analysts covering the stock rate shares Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target is about $492, below recent levels.

Recent strength is one reason analysts are playing catch-up. Coming into Tuesday trading, Cat stock was up about 39% year to date and up about 28% over the past 12 months.

AI probably isn’t responsible for the majority of gains. Instead, Wall Street sees improving construction and mining markets. Analysts project more than $68 billion in 2026 sales, up from less than $65 billion in 2025.

Write to Al Root at allen.root@dowjones.com