Caterpillar (CAT): Evaluating Valuation After Bullish Upgrades and Strategic Push Into AI Data Centers

Caterpillar (NYSE:CAT) has been in the spotlight after a series of bullish analyst upgrades, fueled by growing demand for its power generation equipment used in the fast-expanding AI data center sector.

Following strategic moves such as the acquisition of RPMGlobal and partnerships to target digital infrastructure needs, investors are weighing Caterpillar’s long-term growth as the company adapts to surging trends in technology-driven markets.

See our latest analysis for Caterpillar.

Caterpillar’s shares have soared to fresh highs this year as demand from AI data centers and big-ticket infrastructure projects sparked a string of upbeat headlines, including the acquisition of RPMGlobal and an affirmed quarterly dividend. With the stock returning nearly 47% on a share price basis year-to-date and a total shareholder return of almost 36% over the past 12 months, momentum is firmly on Caterpillar’s side as investors bet on long-term growth in digital infrastructure and industrial markets.

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Yet with shares already at record highs after a year of remarkable gains, the real question for investors is whether Caterpillar remains undervalued or if today’s price already factors in all the expected future growth.

Most Popular Narrative: 12.6% Overvalued

Caterpillar’s narrative fair value is $467.96 with a 12.6% premium to the last close of $527.08. This prompts fresh debate over whether recent momentum justifies current valuations or risks a pullback if lofty expectations are not met.

Record backlog growth across all three primary segments, driven by strong global infrastructure demand (particularly in North America, Africa, and the Middle East), positions Caterpillar for above-trend sales growth in late 2025 and into 2026. This is supporting top-line revenue expansion. Robust order activity and continued demand from the data center (cloud/AI) buildout, especially in power generation, are driving capacity investments and throughput gains in Energy & Transportation. This sets the stage for further sales and operating profit growth as new capacity ramps up over 2026 and 2027.

Read the complete narrative.

Wondering what forecasts power this valuation? The core narrative is built around a powerful combination: multi-year sales expansion, growing margins, and a profit multiple that reflects sector leadership. Which specific financial targets underpin the price—and are they bold or just realistic? Dive into the full narrative to see which numbers move the needle.

Result: Fair Value of $467.96 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, escalating tariffs and ongoing global supply chain disruptions remain significant risks. These factors could pressure Caterpillar’s margins and sharply alter growth expectations.

Find out about the key risks to this Caterpillar narrative.

Build Your Own Caterpillar Narrative

If you want to see how the numbers stack up differently or prefer your own research, you can build and analyze your own Caterpillar narrative in just a few minutes, then Do it your way.

A great starting point for your Caterpillar research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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