Caterpillar's $72 billion backlog points to a short correction

Caterpillar's recent stock pullback arrives even as its AI-linked businesses accelerate. The company's power & energy segment grew 17% year over year in the second quarter, and its construction segment saw a 35% revenue jump, with growth in every region but most pronounced in North America — where most tech giants are setting up data centers. That geographic alignment suggests the demand is structural, not a one-off.

The scale of the opportunity shows in the backlog, which stands at $72 billion and has almost doubled year over year. That provides meaningful revenue visibility and serves as a multi-year green flag, according to the article. Meanwhile, hyperscalers are committing vast sums to capital expenditures, with six major players projected to spend $1.3 trillion in 2027. Grand View Research projects a 30.6% CAGR for the AI industry through 2033.

What the correction has done is make the valuation more compelling. Caterpillar now trades at a 1.4 PEG ratio, down from above 2 previously. For long-term investors, the bet is that the AI boom continues and that power and construction remain critical bottlenecks. The outcome hinges on whether hyperscaler spending stays on track, but the backlog suggests near-term demand is already locked in.