Caterpillar is a great company with real AI/data-center demand, but may have overestimated its potential. Its multiple fell from ~44x at peak to 25-30x, yet the price is still high and may fall further before it rises, especially if data-center construction slows; size for risk.

This is Caterpillar (CAT). Its stock has fallen by about 20% from its all-time high, but overall, Caterpillar's stock is up by about 48% this year. Therefore, this is not a declining stock.

It's a great company that took off very quickly , then declined .

What happened was that Wall Street began to treat Caterpillar as a company specializing in artificial intelligence. AI data centers require enormous amounts of energy, and Caterpillar sells the massive engines, generators, and turbines that provide it.

And the numbers are real. The last quarter was the first in its history that Caterpillar achieved profits of $20. Adjusted earnings per share were $8.17, up from $4.72 a year ago.

Power generation sales jumped 72%, driven by data centers. Backlogs of orders nearly doubled in one year to about $72 billion, and turbine orders now extend into 2028 and 2029.

So, what caused this huge drop? On June 30, the day the stock hit its all-time high, Michael Bury announced he was shorting it , and the stock fell by approximately 7% the following day.

In addition, the tariffs are costing Caterpillar an estimated $2.2 billion this year. But mostly, this was just a revaluation of market value. At its peak, the stock was trading at approximately 44 times its projected earnings.

Today, however, it ranges between 25 and 30 times, according to the source. This is much less expensive, but still more than 23 times what it was trading at a year ago.

Analysts unanimously recommend buying, with an average target price of around $980 per share . The company is also a leader in dividend payouts, having seen 32 consecutive years of dividend increases, but the current yield is less than 1%, so dividends are not the main reason to own the stock today.

Excellent work, and a genuine request, but the price still needs some work. If the construction of data centers slows down, the stock price may fall further before it rises. Make sure you determine the investment size appropriately, as this option involves some risks .

This is followed by a great company with real demand, but which has overestimated its potential. This is Caterpillar. The company is operating at full capacity, but its share price is still high and may fall further before it rises.