For Caterpillar, AI Revolution Has Turned to an Industrial Revolution
When we think of artificial intelligence (AI) we often think of the giant tech companies that are fueling this new industry. We think of companies like NVIDIA and Advanced Micro Devices that build the highly complex and powerful AI microchips. Or, we might think of companies like Alphabet, Amazon, Microsoft, Apple, Meta or Tesla, among many others, that use these advanced microchips to create new goods and services for the consumer market.
But for most people, companies such as Caterpillar, Steel Dynamics, Honeywell, Johnson Controls and Corning are typically not in the realm of conversation when it comes to AI. Yet these old-school, blue collar, industrial companies are also benefitting from the global buildout of AI and the massive infrastructure that’s needed to support it.
According to data from Gartner, total global spending on AI is expected to reach $2.6 trillion in 2026. That’s up 4,060% from the $62.5 billion spent in 2022. Roughly 50% of the world’s total spending on AI comes from the U.S. But all that AI spending – and use – requires a massive amount of infrastructure.
AI infrastructure is the collection of data centers, hardware, software, networking and power capacity needed to train, deploy and operate AI systems. Think of it as the digital equivalent to the power grids, roads and factories that enable an industrial economy.
On Tuesday, Aug. 4, Caterpillar released its financial results for the April-June second quarter. The company reported consolidated sales and revenues of $20.5 billion, up 24% from the second quarter of 2025. It was the first time in Caterpillar’s 101-year history that sales and revenues exceeded $20 billion in a single quarter. Caterpillar also reported an operating profit of $4.3 billion, 50% higher than the second quarter of 2025.
Caterpillar announced its order backlog reached a hefty $71.2 billion, up 92% from the second quarter of 2025. A company’s order backlog represents the value of customer orders received but not yet produced, filled or shipped. The sizable backlog was likely behind management’s announcement that it expects strong sales and revenue growth to continue for the rest of 2026.
Caterpillar’s record-setting second quarter was led by its Construction Industries (CI) and Power & Energy (P&E) segments. In the second quarter, CI sales increased $2.156 billion (35%) to $8.3 billion. CI segment profit rose $703 million (57%) to $1.947 billion. Likewise, its P&E segment reported second quarter sales of $8.2 billion, up $1.2 billion (17%) from the second quarter of 2025. P&E segment profit rose $473 million (30%) to reach $2.027 billion.
Caterpillar has been a major beneficiary of the ongoing buildout of AI infrastructure. Before data centers can be built, they require site preparation, excavation, road construction and utility installation. These activities require excavators, bulldozers, loaders and other heavy machinery – all which Caterpillar can supply.
Once built, data centers require tremendous amounts of electricity and backup power. Caterpillar supplies generator sets, turbines, backup power systems and distributed power solutions to provide reliable and scalable energy to meet the heavy computing loads required by AI data centers.
To reflect its growing involvement in the AI buildout, Caterpillar’s stock has soared. So far this year, Caterpillar’s stock has gained 49.4%, vastly outpacing the S&P 500’s gain of just 13.9%. Over the past 12 months, its stock has risen 106.8%. Over the past two years, its stock has risen 149.1%.
The AI revolution has triggered one of the largest industrial investment cycles in U.S. history. Consulting firm McKinsey estimates global spending on AI-related data center infrastructure could reach $7 trillion by 2030. This has created an unprecedented demand for industrial equipment, materials and components that span multiple industries and tiers of the supply chain.
The AI infrastructure buildout is creating a modern day “picks and shovels” boom. And manufacturing companies are quickly becoming one of the biggest indirect winners of the AI revolution.
Mark M. Grywacheski, Investment Advisor
Quad Cities Investment Group is a Registered Investment Adviser.
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