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Caterpillar is a 100-year-old company that makes bulldozers. On June 30th, its stock hit a record $1,073. The reason wasn't bulldozers, it was AI. That same day, Michael Burry shorted it at 1060. He wrote, "I have never shorted Caterpillar." So far, he's been right. The stock fell 23% in July and closed Friday at 800.
Now, he swapped his short for puts expiring in December 2027, struck around $400. That's half today's price. Wall Street's average target is 971. So, is Caterpillar a new AI-powered company or an old cyclical priced for perfection? Let's break down Caterpillar. . Caterpillar makes the big yellow machines, excavators, bulldozers, and giant mining trucks.
It has three main businesses, construction, mining, and power and energy. Last quarter, all three grew by double digits. The new star is power. AI data centers need electricity now, and the grid can take years to connect them. So, many are building their own power plants on site with Caterpillar gas generators and turbines.
Power generation sales jumped 29% last quarter to $3.1 billion dollars, driven mainly by data centers. Caterpillar has signed at least six agreements with customers that each want a gigawatt or more of power. One developer alone is deploying two gigawatts of Caterpillar generators for AI, and it plans to triple its capacity to build large engines.
Caterpillar was formed in 1925 when two California tractor makers merged, Holt and Best. Benjamin Holt's tractors crawled on tracks instead of wheels. Legend says a photographer thought it moved like a caterpillar, and the name stuck. It's in the Dow, and it has raised its dividend for more than 30 years in a row.
But Caterpillar is also a classic boom and bust stock. In the financial crisis, its sales fell by more than a third, and the stock lost about three quarters of its value. After the mining boom ended, sales fell from $66 billion in 2012 to 38.5 billion in 2016, and the stock roughly halved. Here's the stock since 2024.
It spent most of that year between about $300 and $400. In April 2025, the tariff crash knocked it down to about 267. Then the data center story took off. Caterpillar ended 2025 at 573, up 59% for the year. This year, it kept climbing to a record 1,073 on June 30th, close to half a trillion dollars in value.
That's the day Burry shorted it at 1060.98. When his short became public, the stock fell almost 7% in a day. July finished down 23%. Record earnings in August bounced it 5.6%, but it has drifted since. On October 7th, as long-term Treasury yields hit their highest level since 2002, it fell almost 6%.
Friday's close, $800 and 47 cents. Now, the latest quarter, reported August 4th. Revenue, $20.5 billion, up 24%. Caterpillar's first $20 billion ever. Adjusted earnings per share, 817, up from 472 a year ago. Construction sales jumped 35%. Mining, 20. Power and energy, 17. And the backlog hit a record $72 billion, up 92% in a year.
Caterpillar raised its full-year forecast to mid the high teens sales growth. So, why bet against all that? Because of what usually happens next. Caterpillar sells to builders, miners, and energy companies. When they're spending, Caterpillar booms. When they stop, its sales collapse, and the stock usually falls faster than the sales.
Look at the numbers. 2008, $51 billion in sales. 2009, 32. 2012, 66 billion. 2016, 38 and 1/2 and a loss for the year. The last 12 months, 75 billion, a new record. The question is what comes after it. So, the bull case, five points. One, a record backlog. $72 billion of orders waiting to ship, up 92% in a year.
About 60% should ship within 12 months. Two, AI needs power and power takes time. Connecting to the grid can take years. Caterpillar says it can get on-site power running in under a year. That speed is what data centers are paying for. That's why it's tripling its large engine capacity. Three, it's not just AI.
Construction grew 35%, mining 20. All three businesses are growing, and Caterpillar just raised its full-year outlook. Four, the money keeps coming after the sale. Data center generators often run around the clock, not just as backup. That means constant wear, parts, and service. Every machine Caterpillar sells can earn service revenue for decades.
Five, it pays you to wait. More than 30 years of dividend raises and a billion and a half dollars of buybacks last quarter alone. 28 analysts have an average target of 971, about 20% above Friday's close. The bull view in one line. Caterpillar sells the picks and shovels of the AI power boom, plus the service contracts that come after.
Now the Burry case and Burry's version of it. One, priced like a tech stock. When Burry shorted it, Caterpillar's price-to-sales ratio was the highest in three decades. Even after the drop, it trades at about 28 times expected earnings for a company whose sales have fallen 40% in past downturns. Two, the cycle always comes back.
Its last two big booms ended in busts in 2009 and again in 2016. Burry's bet is that this boom ends the same way, just with data centers instead of mines. Three, a big bet on AI spending. A big part of the excitement depends on hyperscalers continuing to build at a record pace. If they slow down, power orders slow, too.
Caterpillar's own CEO has warned that backlog growth may be lumpy. Four, Michael Burry. He shorted at 1060.98 the day of the record high. Now he holds puts expiring December 2027 struck around 400. He sees it as part of an AI bubble that looks like the final months of the dot-com era. Five, rates and tariffs.
Long-term Treasury yields just hit their highest level since 2002. Higher rates make big machines more expensive for customers to finance and they hit expensive stocks hardest. And in April, Caterpillar estimated tariffs would cost it 2.2 to 2.4 billion dollars this year. The bear view in one line. Caterpillar is still a cyclical machine maker now priced as if the AI boom will never end.
their spending plans for data centers and the power to run them. Then Caterpillar's own report expected in early November. Wall Street expects about 695 a share. Watch the backlog, power generation growth and margins, and watch interest rates. On the chart, the record at 1073 is the ceiling. The summer low near 776 is the floor.
Wall Street's average target is 971. Burry strikes sit around 400. For options traders, Caterpillar is no longer a sleepy industrial. It fell 23% in July and almost 6% in a single day this month. At $800 a share, one contract controls about $80,000 of stock. For an account like ours, that usually means defined risk spreads rather than covered calls or cash secured puts.
Burry's structure puts more than a year out struck at half cycle turns hard, the payout is big. So who's right? 28 analysts at 971 or Burry betting on a bust? .
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