Caterpillar (CAT.US) Has Fallen Nearly 30% from Its Record High as Elevated Oil Prices and a Fading AI Trade Weigh on Industrial Stocks

Caterpillar (CAT.US) shares are heading toward a decline of more than 30% from their all-time peak, according to a report.

High crude oil prices, rising US Treasury yields, and cooling enthusiasm for the artificial intelligence (AI) trade have kept the entire industrial sector under sustained pressure.

On Wednesday, the stock fell as much as 4% intraday, touching a session low of $742.01. It has now dropped about 30% from its record high of $1,064.90 set in late June.

This slump coincides with a broad selloff in chip stocks and the AI infrastructure segment, while the latest inflation data heightened concerns that the Federal Reserve may raise interest rates more aggressively than expected. In recent months, traders have been on guard against the risk that AI infrastructure names have "risen too fast and stretched valuations." Caterpillar's weakness also echoes the overall volatility among power equipment makers, chip manufacturers, and companies across the data center supply chain.

Since mid-August, both oil prices and US Treasury yields have climbed, further squeezing the room for industrial stocks to perform. Over a longer horizon, however, Caterpillar has still gained about 40% over the past year, reflecting investors' confidence in its long-term fundamentals. Data center construction continues to drive orders for the company's gas turbines and engines, while its construction machinery business also maintains a rapid pace of expansion.

Attention now turns to the earnings report due later this month. Jefferies analyst Stephen Volkmann noted that machinery manufacturers are broadly facing cost pressures from rising freight and raw material costs; for Caterpillar to protect its margins, it will increasingly depend on sales volume growth. "End demand in the construction machinery space remains strong, and the upswing is spreading outward from data centers. But investors' real concern is whether, against a backdrop of persistent commodity inflation, price pass-through can cover costs and whether margins will come under pressure," Volkmann wrote in a research note this week.