investor Michael Burry The Big Short star has his sights set on a new short film goal: caterpillarthe heavy equipment giant that has seen a resurgence thanks to the boom in AI infrastructure.
Burry, the former hedge fund manager who famously predicted and made money from the 2008 subprime mortgage crisis Hundreds of millions of dollars For his investors, he said Caterpillar stock is now overvalued after the stock rose more than 100% last year.
“Caterpillar jumped on me,” Burry wrote on a Substack post this week. “I’ve never shorted Caterpillar. It’s always done me well on the long side in the past.”
Times have changed. The investor said he shorted Caterpillar on Tuesday at $1,060.98 per share. Through Wednesday, Caterpillar shares closed down nearly 7%. On Thursday, shares fell as much as 4%, hitting their lowest level since mid-June at about $949 per share.
Still, not everyone agrees with Burry’s call. Sergey Glinyanov, a senior analyst at Freedom Broker who covers Caterpillar, said Assets in an email that Burry’s short position likely won’t impact the stock at all. What the famous investor is missing is that Caterpillar’s stock price isn’t rising because of the AI hype, he said.
Glinyanov told Assets that investors are actually rewarding the company because it benefits from a fundamental shift in infrastructure spending.
“There is a structural problem looming,” Glinyanov told Fortune, citing a growing demand for on-premise power systems as AI data centers look for alternatives to an aging power grid that can’t always keep up with rising energy demands.
As developers build larger and larger AI campuses, they are increasingly looking to the diesel and natural gas generator power systems that Caterpillar sells to ensure reliable power. The company’s positioning in this space puts it in a position to capture a larger portion of that spending, Glinyanov argues.
How AI has advanced chip manufacturers Nvidia reaches record highsInvestors have also been bidding up shares of other companies that could benefit from the wave of spending by hyperscalers and developers scrambling to build data centers. These companies include GE Vernova, which specializes in power generation and is based in Ohio Vertivethat provide advanced cooling systems have become a popular way to bet on the AI revolution without buying chipmakers directly. Shares of GE Vernova are up more than 60% year-to-date, while shares of Vertiv are up 70% over the same period.
Still, investors are betting that Caterpillar will be among the biggest beneficiaries. The company’s stock had risen about 172% in the past 12 months and more than 77% this year alone before Burry announced his position. Its price-to-sales ratio – a measure of how much investors are willing to pay for each dollar of sales – is now at its highest level in three decades, he added.
It’s this lead-up that leads Burry to bet that the stock is overvalued. However, his recent short against the company is also based on his general belief that the market is in an AI bubble. In May, Burry said The market felt “like the final months of the 1999-2000 bubble.” In addition to his Caterpillar short, the investor also said he refreshed his bet against the iShares Semiconductor ETF (SOXX), which tracks semiconductor companies, and took positions against it Tesla And Nvidia.
Of course, it is unclear whether Burry or Glinyanov will be right in the end.
Glinyanov said the company traditional business The share of heavy equipment sales and rentals continues to be good as dealer inventories improve and retail demand continues. The combination of consistency in its traditional business and its growing exposure to AI-related energy infrastructure has contributed to the stock’s premium value, he said. The company strong results from the first quarter, in which revenue rose 22% year-on-year to $17.4 billion and beat Wall Street expectations, backs up his argument.
Still, Glinyanov acknowledged that Caterpillar’s top-notch valuation ultimately depends on the largest AI companies continuing to invest aggressively in new data centers and energy infrastructure.
His company’s price target is $910, indicating a “potential near-term decline,” he said. If hyperscalers quickly scale back their massive data center investments, some of the optimism surrounding Caterpillar could fade just as quickly.
“If we see deterioration in hyperscalers’ fundamentals – particularly cash flow generation or debt loads – multiples could see a significant decline,” he said.