Caterpillar shares fell 10%. Why are investors selling shares of this AI-boom beneficiary?

Shares of construction equipment manufacturer Caterpillar fell more than 10% during trading on October 29, dropping to a nine-month low following the release of its quarterly earnings report. The company’s revenue fell slightly short of analysts’ expectations for the first time in six quarters, and investors are increasingly skeptical about the sustainability of the artificial intelligence boom, which had been driving demand for its data center equipment.

Caterpillar reported on Thursday that its quarterly revenue had grown, particularly in the division serving AI data centers. However, the results still fell short of Wall Street’s extremely high expectations, according to The Wall Street Journal.

Caterpillar reported that its total revenue in the third quarter rose 17% year-over-year to $20.68 billion. The consensus estimate was $20.76 billion, according to data from MarketWatch. This marks the first time in six quarters that Caterpillar has failed to beat expectations on this metric. However, adjusted earnings per share exceeded the forecast—$7.2 versus the expected $7.06, according to FactSet.

Revenue for Caterpillar's energy division rose 18% to $8.78 billion. This business is benefiting from growing demand for large generator sets and turbines designed to provide electricity for data center construction projects.

The company's order backlog reached a record $78.1 billion, increasing by $6 billion over the quarter. Caterpillar CEO Joe Creed said that Caterpillar sees demand beyond its existing order backlog through 2030, and in some cases even further into the future, according to Reuters. However, the growth in the order backlog was smaller than in previous periods and, according to JPMorgan’s estimates, may not have met market expectations of $80 billion.

Despite strong demand, Caterpillar has maintained its revenue growth forecast for 2026 in the 15–19% range. At the same time, analysts expect growth of about 18%, according to Reuters. The company is increasing production of engines and turbines, but expanding production capacity takes time and hinders its ability to meet demand more quickly.

In the first half of 2026, Caterpillar was the fastest-growing stock in the Dow Jones Index, according to Yahoo Finance. By the end of June, the stock had risen 86% since the start of the year. Since the start of the third quarter, the stock has lost nearly all of that gain and is now trading at only 12% above its level at the start of the year.

Caterpillar has become one of the beneficiaries of the AI boom thanks to its supply of equipment for data center energy infrastructure. However, concerns about a slowdown in AI investment, as well as growing opposition to the construction of data centers, are dampening investor sentiment, according to Reuters.

Investors’ shift from cyclical companies to more defensive sectors is also putting pressure on stocks. Investors are pulling money out of funds that hold shares of economically sensitive companies, including Caterpillar, and shifting it into healthcare and utilities, according to Todd Son, managing director and chief ETF strategist at Baird Strategas, as quoted by Yahoo Finance. The analyst believes that this shift away from cyclical stocks is unusual, given that the S&P 500 is near record highs. At the same time, low expectations could facilitate a recovery in these stocks: “The bar for a recovery in cyclical sectors is low,” he wrote.

According to MarketWatch, 18 analysts currently recommend buying the company’s stock, 13 advise holding it, and one recommends selling it. Three months ago, the breakdown of recommendations was less optimistic: 15 analysts recommended buying the stock, 13 advised holding it, and two recommended selling it. The average target price for the stock is $945, which is 32% higher than the closing price on October 28.

This article was AI-translated and verified by a human editor