Burry bets against Caterpillar after AI-linked stock surge

Michael Burry has taken a short position against Caterpillar after a sharp rise in the machinery maker’s shares tied to investor enthusiasm for AI-related power demand. The trade matters because Caterpillar has become one of the broader market’s ways to bet on data-center buildouts, not just construction and mining equipment.

Burry, known for anticipating the 2008 subprime mortgage collapse, wrote on Substack this week that Caterpillar looked overvalued to him after a steep climb. He said he shorted the stock Tuesday at $1,060.98 a share.

Fortune reported that Caterpillar shares closed nearly 7% lower Wednesday. By Thursday, the stock fell as much as 4% and touched about $949, its lowest level since mid-June, according to Fortune.

Burry said in his Substack post that Caterpillar had stood out to him, while noting he had not previously shorted the company and had made money owning it in the past. His argument centers on valuation after the stock’s rise: Fortune reported that Caterpillar had gained about 172% over 12 months and more than 77% this year before Burry disclosed the position.

According to Burry, Caterpillar’s price-to-sales ratio has reached its highest level in 30 years. That metric compares a company’s market value with its revenue and is often used by investors to judge how much buyers are paying for each dollar of sales.

Analyst says power demand is driving the move

Sergey Glinyanov, a senior analyst at Freedom Broker who covers Caterpillar, told Fortune that Burry’s short position is unlikely to move the stock on its own. Glinyanov said investors are responding to a change in infrastructure demand rather than AI enthusiasm alone.

Glinyanov pointed to demand for on-site power systems as AI data centers seek reliable electricity beyond what aging grids can provide. Caterpillar sells diesel and natural-gas generator systems, giving it exposure to developers building larger AI campuses, he told Fortune.

The same investor logic has boosted other companies linked to the data-center buildout, according to Fortune. GE Vernova, which works in power generation, has risen more than 60% this year, while Vertiv, an Ohio company that supplies cooling systems, has climbed 70% over the same period, Fortune reported.

Burry’s Caterpillar short also fits a broader warning he has made about AI-related stocks. CNBC reported in May that Burry said the market felt similar to the final months of the 1999-2000 bubble. Fortune reported that he also said he renewed a wager against the iShares Semiconductor ETF and took positions against Tesla and Nvidia.

Valuation still depends on AI spending

Glinyanov told Fortune that Caterpillar’s core equipment sales and rental business remains solid, with dealer inventories improving and retail demand holding up. He also cited Caterpillar’s first-quarter results, in which the company reported sales of $17.4 billion, up 22% from a year earlier and above Wall Street expectations.

Still, Glinyanov said the stock’s richer valuation relies on continued spending by the largest AI companies on data centers and power equipment. Freedom Broker’s price target for Caterpillar is $910, which Glinyanov said implies a possible near-term decline.

He told Fortune that if hyperscalers show weaker cash flow or heavier debt burdens, valuation multiples could come under pressure. That leaves the dispute over Caterpillar tied to a larger question for the market: how long AI data-center spending can keep supporting companies outside the chip sector.

This story draws on original reporting from Fortune.