After a chaotic week, Wall Street can't get its story straight on power generation equipment for AI.
HSBC analyst Sean McLoughlin on Friday upgraded shares of GE Vernova to Buy from Hold, citing higher pricing and profit margins from strong demand for power-generating equipment. His price target went to $1,100 from $1,040.
Mizuho analyst Maheep Mandloi also raised his price target to $959 from $949, following GE Vernova's "3Q26 beat and raise" quarter. GE Vernova reported third-quarter results on Wednesday.
Meanwhile, Baird analyst Mig Dobre cut his Caterpillar price target to $729 from $970, noting the company's third-quarter earnings "beat," but citing that growth is decelerating.
"Good becoming less good usually results in valuation compression and a lower stock price," wrote Dobre. "One might say the AI super-cycle makes such old world frameworks irrelevant, yet for cyclical stocks such as Cat, they are not."
He still has questions about the durability to AI data center demand that sent shares north of $1,000 in June.
Opinions are diverging on what is essentially the same issue. Both stocks are tied to the AI trade, selling power-generating equipment to AI data centers. Cat, of course, also sells heavy machinery. (Some of that is used to build AI data centers.)
Wall Street seems more apt to Buy the dip in GE Vernova stock than opt for Cat.
Valuation doesn't seem to justify that position. GE Vernova trades for about 32 times earnings expected over the coming 12 months. Cat stock trades for 20 times. Of course, valuation is a function of expected earnings growth. But Cat is expected to grow earnings per share close to 20% a year for the coming three years, according to FactSet, a few percentage points better than GE Vernova.
Whether to buy or sell Cat or GE Vernova stocks is beside the point. Wall Street is starting to get more nervous about the AI trade after a set of weak earnings from Alphabet, Intel, and Amazon.com.
AI fears overwhelmed the GE Vernova upgrade. Shares were down 2.5% in early trading, while the S&P 500 dropped 1.3%. Cat shares were down 1.9%.
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