Caterpillar Inc. (ticker: CAT) unexpectedly emerged as the leading stock in the Dow Jones Industrial Average (DJIA) in 2025, achieving a remarkable surge of 59.5%. This surge outpaced not only the Dow’s overall increase of approximately 13% but also other significant players such as Goldman Sachs, which rose 55.8%. The heavy machinery manufacturer, known primarily for its bulldozers and excavators, capitalized on a unique combination of infrastructure demand and advancements in artificial intelligence (AI).
Caterpillar’s growth story is closely tied to the expanding AI sector, which spurred unprecedented demand for data center construction. As companies raced to enhance their technological capabilities, Caterpillar’s Energy & Transportation division became a vital supplier of backup power systems for these facilities. In the third quarter of 2025, Caterpillar reported record revenues of $17.6 billion, driven by a 17% increase in power systems sales, reaching $8.39 billion. CEO Joe Creed remarked on the company’s adaptability, stating, “Our team’s continued discipline in a dynamic environment, coupled with a growing backlog, positions us for sustained momentum and long-term profitable growth.”
AI and Infrastructure Boost Caterpillar’s Growth
Caterpillar’s integration into the AI landscape represents a significant shift in its business model. The partnership with NVIDIA, announced at the Consumer Electronics Show (CES) in January 2026, showcased the potential for AI-driven enhancements in industrial machinery. The collaboration focuses on using NVIDIA’s edge AI platform, Jetson Thor, to improve machine intelligence and safety features in Caterpillar’s equipment.
As the demand for AI data centers grew, Caterpillar’s stock was re-rated by investors, who began to view the company as a critical player in the digital infrastructure landscape, rather than just a construction equipment manufacturer. Ryan Keeney, an analyst at Third Bridge, noted that “power-generation sales are expected to continue sustainably growing as CAT maintains their market leadership in backup power for data center applications.”
Beyond AI, increased spending on traditional infrastructure contributed significantly to Caterpillar’s success. In the United States, the deployment of funds from the 2021 infrastructure law and a renewed focus on domestic energy and resource extraction led to a resurgence in construction and mining activities. Caterpillar’s Construction Industries segment recorded approximately 7% revenue growth by late 2025, bolstered by strong pricing power.
By early 2026, Caterpillar’s order backlog reached a record $39.9 billion, securing production for the next two years. This backlog provides a safety net for the company, even amid potential economic slowdowns. Additionally, the ongoing transition to renewable energy has increased demand for Caterpillar’s equipment, vital for mining key materials like copper and lithium.
Challenges and Future Outlook for Caterpillar
Despite its remarkable performance, Caterpillar faced significant challenges throughout 2025. Unexpected tariffs imposed by President Donald Trump on U.S. trading partners caused initial disruptions, leading to a drop in the Dow and potential increases in production costs. Caterpillar estimated that tariffs on imported components could amount to as much as $1.8 billion for the year. However, the company responded effectively by raising prices and improving supply chain efficiency.
As inflation eased and the Federal Reserve implemented rate cuts, Caterpillar managed to stabilize its operations. By the end of 2025, the stock had reached $626.60, contributing to a market capitalization that surpassed $293 billion for the first time.
Looking ahead to 2026, analysts maintain a positive outlook for Caterpillar. Citigroup’s Kyle Menges set a price target of $710, while J.P. Morgan raised its target to a Street-high $740, indicating potential for further gains. Approximately 13 of 23 analysts rate Caterpillar as a “Strong Buy,” emphasizing its position at the intersection of AI and infrastructure.
While risks remain, including high U.S. tariff rates and a looming labor shortage in the construction industry, Caterpillar’s solid order books and ongoing infrastructure projects position it well for sustained growth. If the current supercycle continues, Caterpillar could maintain its upward trajectory, further solidifying its reputation as a leader in both traditional and digital industrial markets.
