Caterpillar Shares Eye 30% Slump as Oil Bites, AI Rally Stalls

Caterpillar Inc. shares are on track to fall more than 30% from their record high as concerns about oil prices, bond yields and the future of the artificial intelligence trade roil the industrial sector.

The stock fell as much as 4% to trade at a session low of $742.01 Wednesday. It’s now down about 30% from a late-June record of $1,064.90.

Wednesday’s decline coincides with a broad selloff in chip stocks and other AI infrastructure names, with inflation data raising concerns that the Federal Reserve may need to hike interest rates more aggressively than expected.

Traders have fretted in recent months that AI infrastructure stocks were overstretched after advancing too far, too fast. Caterpillar’s slide has come alongside broader volatility in power equipment manufacturers, chipmakers and other companies involved in data center construction. Rising oil prices and bond yields have added pressure to industrial shares since mid-August.

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Yet Caterpillar shares are still up about 40% over the past year, reflecting investors’ confidence in the long-term outlook. Data centers have driven demand for the company’s power generation turbines and engines, and its construction equipment business is growing at a rapid clip.

Investors are now awaiting an earnings report due later this month. Machinery companies are facing cost pressure as freight transportation and raw materials get more expensive, meaning Caterpillar’s ability to grow its margins will depend mainly on higher sales volumes, according to Jefferies’ Stephen Volkmann.

“Topline demand in machinery remains robust and is spreading well beyond data centers, but investor concerns are focused on the potential for price/cost margin pressure amid continued commodity inflation,” Volkmann wrote in a note this week.