Caterpillar Bulldozes into AI & How Situational Awareness Lost $35B

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This episode is brought to you by Charles Schwab. Timing the market, fighting inflation, managing risk? Financial decisions can be tricky. Investing isn't just math, it's psychology. Your neurons are playing favorites, and the market doesn't care. Financial Decoder, an original podcast from Charles Schwab, can help.
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**Ann Berry** (0:30)
Palantir, its CEO, said AI sovereignty drove the company's quote, otherworldly earnings. We have the latest. Situational awareness, we break down the collapse of the AI hedge fund and profile the firm that was poised to benefit. And Caterpillar, the company known for yellow bulldozers is the latest unlikely AI winner. We explore why. For Tuesday, August 4th, it's Brew Markets Daily, and I'm Ann Berry.
More market details to come, but first, Caterpillar, the world's biggest maker of construction equipment, the market cap of over $400 billion.
Well, today, delivering one of the biggest earning surprises of the quarter, with a leap onto that big market bandwagon that is, yes, you guessed it, data centers. Caterpillar just reported record quarterly revenue of $20.5 billion, the first time in its history that it's topped the $20 billion mark. Sales climbed 24% from a year ago, its backlog is up over 90% to $72 billion, and adjusted earnings surged to $8.17 a share, crushing all street expectations by nearly $2.
Lots of big news here. And just as importantly, Caterpillar raised its full year sales outlook after what CEO Joe Creed described as continued strength in AI related infrastructure investment. Where management said that demand tied to AI data centers boosted both its power and energy business, which supplies engines, generators and backup power systems, sales there jumping 17 percent, as well as benefits to the construction industries division as contractors build massive AI campuses.
Revenue there jumped 35 percent to over $8.3 billion, helped by a remarkable 50 percent increase in North American retail sales. Well, this caught our eye as yet another example of a company that investors don't traditionally think of as an AI stock, getting a ton of benefit from the data center boom. Yesterday, we talked about Warehouser, the $18.6 billion market cap timber company making money from selling land on which to build data centers, and now stretching to pitch timber as a construction material of choice for that building activity. That's one of the quirkier examples of the transformational power of data centers in driving earnings. Others have been, of course, that we've talked here on the show about, Corning, the $138 billion market cap glass maker, best known for gorilla glass, benefiting from a fiber optic boom. There's Train Technologies, the $104 billion market cap HVAC manufacturer providing cooling systems for data centers. And then you've got businesses like Ecolabs, $282 billion of market cap, providing water treatment and efficiency technologies that operators use to reduce water usage. But topping my list of quirky data center beneficiaries isn't even Caterpillar in his Toto. Famous for luxury toilets, but the roughly $6.5 billion market cap Japanese company also has a high-tech ceramics business. Those ultra-pure ceramic components are used in semiconductor manufacturing equipment. So the AI chip boom has lifted a company that most people know for its bidets.
Activist investor at Palisade Capital even called Toto, quote, the most overlooked AI memory beneficiary. Well, fun times, Caterpillar stock up more than 6% today. We're going to keep on watching. Coming up in a moment, a spin through the headlines that are moving the markets today, including earnings out of Wayfair, McDonald's and Palantir. But first, this episode is brought to you by Charles Schwab. Timing the market, fighting inflation, balancing risk. No one says financial decisions are easy. In fact, it's the opposite. Financial decisions can be really tricky, and it's often your own thinking that can lead you astray. Financial Decoder, an original podcast from Charles Schwab can help.

**SPEAKER_1** (4:28)
Join host Mark Reapy, head of the Schwab Center for Financial Research, as he offers modern strategies to help combat the, wait, what in your head? Mental traps like overconfidence, loss aversion and recency bias may cloud your investing decisions. When you understand these patterns, you can take steps to make better informed financial decisions.

**Ann Berry** (4:45)
Listen at schwab.com/financialdecoder, or wherever you get your podcasts, that's schwab.com/financialdecoder.
Well, let's take a quick spin through some of the headlines that are moving the markets today. And it's earnings central. Shares of Wayfair, tickle W, keeping it simple, surged 30% after the furniture retailer beat Wall Street's top and bottom line expectations. And also posted its strongest US revenue growth since 2020

**SPEAKER_1** (5:11)