@OrmontUS (my older brother, Jeff) often buys the stock of companies that service economic booms. For example, he buys engineering companies like Siemens.
The AI boom of data centers is causing a lot of angst due to power needs forcing electric rates higher. Why don’t they build their own?
Caterpillar’s Surging Stock Is Fueled by AI, Not Yellow Excavators
Sales of generators are powering the manufacturing giant’s fastest-growing segment and a race to help data centers skip the grid
By Bob Tita, The Wall Street Journal, Dec. 30, 2025
An ambitious data-center project in Utah is going to need about one-quarter of the power the entire state currently uses. David Gray, co-chief executive for the project’s developer, knows he can’t get it from the electric grid.
Some data-center developers are shopping for electricity beyond regulated utility companies and regional power networks where supplies are increasingly tight. They are starting to build on-site power plants and ordering scores of electric generators…[end quote]
There’s a lot of detail in the article. Meanwhile, I’m struck by the use of well-proven natgas generators instead of more “modern” but maybe less-reliable on-site energy sources like solar, batteries and modular nuclear.
CAT has had an amazing run in 2025. Can it continue?
The other generator company usually mentioned is Cummins. They are up too.
Caterpillar has other aspects going for them. Construction of data centers means more business. Climate change storms and droughts create business opportunities. And tariffs probably gives competitive advantage vs imports.
Also a leading manufacturer of diesel locomotives—having bought GM’s EMD Div second to GE’s locomotive business that went to Wabtec.
And a leader in mining equipment benefitting from materials like gold, copper, silver, iron ore, rare earths, etc.
But it’s been generators that have been powering it ahead and they have competition in the “big machine” segment which is new.
If the AI data center bubble is truly a bubble, then expect the generator division of CAT to crater. I’m not hoping for it, but the word “bubble” seems to be appearing more and more often, so …
I think “crater” is a strong choice of words. For eons company computer centers have had diesel backups. It’s a steady business. AI adds a growth component. It’s in the news getting attention. I expect growth rate of that sector to flatten. I do not expect computer sales to fall.
So was telecommunications, and then suddenly everyone realized it was vastly overbuilt and there were multiple high level bankruptcies. MCI, WorldCom, Nortel, (PSI, 360networks, Winstar, Northpoint, Adelphia). I had Lucent stock at the time; it didn’t do so well either.
Simple fact is that if data centers stop being built at this dizzying pace, diesel generators for data centers are going to stop being ordered at this dizzying pace as well.
I’m not predicting that; the dot com frenzy went on for about three years, and some of those bankruptcies didn’t occur for another two - I’ma just say it the generator division pulling the train at CAT at the moment, a slowdown there is going to be felt.
GEV is often cited as likely to benefit from AI but has been flat since August. To me an under achiever. This is GEs traditional problem child. Wind turbines. Heavy equipment w competition from imports. Recent WSJ articles on transformers fail to mention GEV as traditional leading supplier. Heavily dependent on copper prices.