Caterpillar Fell 12% From Its High After Michael Burry’s Short. Is CAT Stock a Buy in 2026?

Key Stats for Caterpillar Stock

• Current Price: $940.12
• Target Price (Mid): ~$1,390
• Street Target: ~$958
• Potential Total Return: ~48%
• Annualized IRR: ~9% / year
• Earnings Reaction: (0.05%) (April 30, 2026)
• Max Drawdown (1yr): 13.88% (March 30, 2026)

Now Live: Discover how much upside your favorite stocks could have using TIKR’s new Valuation Model (It’s free) >>>

What Happened?

Caterpillar (CAT) spent the first half of 2026 as one of the most improbable AI trades on Wall Street, and now the most famous bear in the market is betting that the story has gone too far. The heavy equipment maker climbed 86% in the first six months of the year as investors treated it as a picks-and-shovels play on the data center buildout. On June 30, Michael Burry, the investor who called the 2008 housing crash, disclosed his first-ever short against the stock at $1,060.98, and the position reached the market the next day. Shares had closed at a record $1,064.90 on June 30, then fell to $940.12 by July 7, a drop of nearly 12%.

That leaves investors with a genuinely hard question. Is Burry early to a valuation reckoning, or is he shorting a company whose fundamentals have never looked stronger? The bear case is clean: CAT trades at its highest price-to-sales ratio in three decades, and a 100-year-old machinery company now carries a multiple usually reserved for software. The bulls point at the order book. Backlog closed the first quarter at a record $63 billion, up 79% from a year earlier, as data center customers locked in engines and turbines years in advance.

Why The Market Turned Caterpillar Into An AI Stock

The link between a bulldozer company and artificial intelligence runs through one segment: Power & Energy, which builds the reciprocating engines and turbines that generate electricity. Data centers need enormous, reliable power, and utility grid connections often arrive late. Caterpillar can bridge that gap, and customers are paying up for the certainty.

Group President Jason Kaiser, who runs Power & Energy, laid out the scale of the commitment on a May 19 call hosted by Bank of America. Caterpillar raised its large reciprocating engine capacity target to three times 2024 levels, up from a two-times target set only months earlier, and lifted turbine capacity 2.5 times. As Kaiser put it, “we just upped our large engine target from 2x to 3x in last quarter’s release.” That is not a company hedging against a slowdown. It is one building for a decade of demand.

The reason management is willing to commit that capital is the aftermarket. Kaiser offered a statistic that reframes the entire opportunity: comparing a standby diesel generator to a gas unit running primary power around the clock, “there’s 40x more services opportunity over the lifetime for that gas genset.” Every engine sold into a data center running 24/7 becomes a decades-long stream of parts and service revenue. That is the compounding engine behind the backlog, and it is why the Power & Energy story is more durable than a single quarter’s order flow.

The news has kept coming. On July 7, Caterpillar acquired Skycatch, a spatial data and AI analytics firm, to feed near-real-time digital twins into its MineStar mining platform, extending its technology push after the earlier RPMGlobal deal. The market barely reacted, which fits the pattern: the story driving CAT is power, not mining software.

Caterpillar Drawdowns (TIKR)

See historical and forward estimates for Caterpillar stock (It’s free!) >>>

What The Bears And Bulls Are Actually Fighting About

Burry’s argument is about price, not the business. He disclosed the short alongside bets against Nvidia, Tesla, Applied Materials, and the SOXX semiconductor index, framing all of them as symptoms of an AI cycle he compares to the final months of the 1999-2000 bubble. His concern with Caterpillar is that its valuation has detached from a normalized earnings cycle. It is worth noting Burry’s position was self-reported through his Substack, not a verified regulatory filing, so the size and structure remain unconfirmed.

The Street disagrees, and it is putting numbers behind the disagreement. On July 2, two days after Burry’s disclosure, Truist raised its price target to $1,218 from $1,043 and kept a Buy rating, citing strong secular demand across power, data center, and infrastructure. Wells Fargo lifted its target to $1,155 in late June. Freedom Broker analyst Sergey Glinyanov told Fortune that the rally reflects a fundamental shift in infrastructure spending rather than pure AI hype, though he set a more cautious $910 target himself.

The one soft spot in the bull case is margins, and it is real. First-quarter total sales rose 22%, but the Power & Energy segment margin Kaiser discussed fell 170 basis points, pressured by tariffs and the depreciation from all that new capacity. Kaiser addressed it directly: the segment carries a tariff headwind plus “the investments that we’re making in order to increase capacity.” He argued operating leverage returns over time as the capacity fills, and that the recip investment pays back in cash by the end of the decade. Investors are being asked to trust that the margin dip is an investment phase, not a structural problem. That trust is exactly what Burry is shorting.

On valuation, CAT trades at a stark premium to its machinery peers. On NTM (next twelve months) EV/EBITDA, enterprise value to earnings before interest, taxes, depreciation, and amortization, Caterpillar sits at 27.96 times against a peer median near 9 times, with Cummins at 13.85 times and Komatsu at 9.72 times. That premium is not obviously justified on current earnings alone. It only holds if the Power & Energy backlog converts into the growth and aftermarket profits management is promising, which is the entire investment debate compressed into one multiple.

Caterpillar NTM EV/EBITDA (TIKR)

See how Caterpillar performs against its peers in TIKR (It’s free!) >>>

TIKR Advanced Model Analysis

• Current Price: $940.12
• Target Price (Mid): ~$1,390
• Potential Total Return: ~48%
• Annualized IRR: ~9% / year

Caterpillar Advanced Valuation Model (TIKR)

See analysts’ growth forecasts and price targets for Caterpillar stock (It’s free!) >>>

The two revenue drivers are Power & Energy capacity coming online, engines and turbines scaling toward three times 2024 levels, and gas compression demand across the oil and gas value chain that Kaiser expects to grow with LNG and natural gas power generation. The margin driver is operating leverage as that new capacity fills and pricing carries through customer agreements. The primary risk is the one Burry names: a data center capex slowdown that would leave the capacity buildout stranded and compress the premium multiple fast.

The upside is that the mid-case return of around 48% still beats what most mature industrials offer, putting CAT in growth territory if the backlog converts as planned. The downside is that at nearly 28 times forward EBITDA, any crack in AI infrastructure spending removes both the earnings growth and the multiple at the same time.

Conclusion

The next real test arrives with second-quarter earnings on August 4. Watch the Power & Energy segment margin. Burry’s thesis strengthens if that margin keeps compressing while revenue climbs, because it would mean the growth is not converting to profit. The bull case holds if management shows the 170-basis-point first-quarter decline stabilizing or reversing as capacity fills and tariff costs ease from the reduced $2.2 billion to $2.4 billion full-year estimate. A record backlog with flat or falling segment margins would prove Burry’s point. A record backlog with margins turning up would prove the Street’s. On August 4, the market stops guessing.

See what stocks billionaire investors are buying so you can follow the smart money with TIKR.

Should You Invest in Caterpillar?

The only way to really know is to look at the numbers yourself. TIKR gives you free access to the same institutional-quality financial data that professional analysts use to answer exactly that question.

Pull up Caterpillar, and you’ll see years of historical financials, what Wall Street analysts expect for revenue and earnings in the quarters ahead, how valuation multiples have moved over time, and whether price targets are trending up or down.

You can build a free watchlist to track Caterpillar alongside every other stock on your radar. No credit card required. Just the data you need to decide for yourself.

Analyze Caterpillar on TIKR Free →

Looking for New Opportunities?

• See what stocks billionaire investors are buying so you can follow the smart money.
• Analyze stocks in as little as 5 minutes with TIKR’s all-in-one, easy-to-use platform.
• The more rocks you overturn… the more opportunities you’ll uncover. Search 100K+ global stocks, global top investor holdings, and more with TIKR.

Disclaimer:

Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!