Michael Burry has taken a bearish position against Caterpillar, arguing that the construction equipment maker has become one of the most overvalued beneficiaries of the artificial intelligence investment boom.
Burry disclosed on Tuesday that he shorted Caterpillar shares at $1,060.98 as part of a broader set of bearish positions that also includes Nvidia, Applied Materials, Tesla, and the iShares Semiconductor ETF (SOXX).
Caterpillar CAT shares fell about 5% on Wednesday, while the broader S&P 500 traded higher.
Caterpillar’s AI-fueled rally draws scrutiny
Traditionally known for manufacturing heavy equipment used in construction and mining, Caterpillar has increasingly been viewed by investors as an AI infrastructure play because of strong demand for its power-generation products from data centers.
The company’s Power and Energy business reported a 22% year-over-year increase in first-quarter sales, supported by growing electricity demand from AI data centers.
That optimism has fueled a sharp rise in the stock.
Caterpillar gained 86% during the first half of 2026 and is up 172% over the past 12 months, making it one of the best-performing stocks in the S&P 500 this year.
The rally has also pushed valuation multiples significantly higher.
According to FactSet, Caterpillar trades at about 39 times expected earnings over the next 12 months, compared with around 13 times earnings three years ago. The stock is also valued at roughly six times expected sales, well above its long-term range of one to two times sales.
“Caterpillar jumped out at me,” Burry wrote in a Tuesday Substack post. “I have never shorted Caterpillar. It has always done great for me on the long side in the past.”
Burry warns of broader AI market excess
Burry said Caterpillar’s valuation was one of the primary reasons for initiating the short position.
He shared a chart showing the company’s price-to-sales ratio had climbed to its highest level in at least three decades as the stock reached record highs.
The investor also expressed broader concerns about the semiconductor sector, arguing that AI-related stocks have become increasingly overextended.
He said the Philadelphia Semiconductor Index is trading about 65% above its 200-day moving average, a level he said had previously been reached only during the dot-com bubble in 2000.
“The proximate cause of today’s rally is big spending announced out of Korea. Well, I see that as the beginning of the end,” Burry said. “It is only a matter of time now.”
Despite Burry’s bearish stance, the recent rally has highlighted how AI investment has expanded beyond technology companies into industrial firms supplying infrastructure for data centers.
Analysts remain constructive
While Caterpillar’s valuation has risen sharply, Wall Street analysts remain broadly positive on the stock.
According to TipRanks data, 10 of the 16 analysts covering Caterpillar have a Buy rating, while the remaining six recommend Hold.
The average 12-month price target stands at $991.94, about 2% below the stock’s current trading price.
The recent rally has also increased Caterpillar’s weighting in the Dow Jones Industrial Average, where it has become one of the index’s highest-priced components, reflecting the stock’s substantial appreciation during the AI-driven market advance.
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