Here's Why Caterpillar Is a Buy Before Earnings

Caterpillar has dropped 16.4% over the past month and is trading 22.3% below its 52-week high as the AI trade cools, but the pullback may offer an entry point ahead of the company's Q2 earnings release on August 4.

The bull case centers on CAT's energy and power segment, which grew 30% last year and is positioned to capture demand from data center construction. Hyperscalers are planning to spend up to $700 billion on infrastructure this year, creating a tailwind for Caterpillar's power generation equipment as AI-driven data centers require massive electrical capacity.

The 16% monthly decline reflects broader rotation out of AI-adjacent names, but the fundamental thesis remains intact for investors willing to look through near-term volatility. The company's exposure to data center buildouts offers a different angle on AI infrastructure spending compared to pure-play semiconductor or cloud names.