Jim Cramer on Caterpillar (CAT)Caterpillar Inc.BATS:CATKalaGhaziJim Cramer on Caterpillar (CAT): A Call to Bring Back the Individual Investor as the Stock Rides the AI Infrastructure Wave Caterpillar Inc. (NYSE:CAT), the iconic American manufacturer of construction and mining equipment, has become one of the most closely watched stocks on the market, and it recently found itself in the spotlight of famed investor Jim Cramer. With the stock posting eye-popping gains—up 124% over the past year and another 28% year-to-date in 2026—Cramer's remarks have added a layer of cultural and retail-investor-focused commentary to a story already rich with institutional interest and fundamental shifts . Cramer's message was direct and, for some, surprising given the stock's meteoric rise. He urged the company's leadership to focus on re-engaging the everyday investor, stating, "I want to say to people, like the CEO of Caterpillar, it is time, you've got to go back to what used to happen, to get the individual investor in your stock. There's no way that Caterpillar, a great American company, should have its stock at 749." His sentiment suggests that despite the stock's impressive ascent to around the $750 level, he believes there is both a disconnect and an opportunity: the company's value proposition and narrative may not be fully resonating with the retail audience that once formed the bedrock of its shareholder base . The New Engine: AI Data Centers and the Power & Energy Unit To understand why Cramer is talking about Caterpillar, and why the stock is at these levels, one must look beyond the traditional cycles of housing starts and mining capex. The company is in the midst of a profound transformation in how the market perceives it, driven overwhelmingly by demand from an unexpected source: artificial intelligence (AI). The surge in CAT stock is largely attributed to the exploding need for reliable, on-site power to fuel the nation's rapidly expanding network of AI data centers . As utilities struggle with interconnection queues and the need for massive grid upgrades, data center developers are increasingly turning to on-site power generation. This is where Caterpillar has stepped into the spotlight. Its Power & Energy unit, which produces industrial natural-gas generators and turbines, has become the company's standout performer . In the fourth quarter of 2025, this segment posted a staggering 23% growth, reaching $9.4 billion in sales, and has effectively become Caterpillar's largest revenue contributor . This strength helped drive record full-year revenue of $67.6 billion and build a record backlog of $51 billion, signaling that demand—particularly for power solutions—is not just strong, but accelerating . Wall Street Takes Notice: BofA's Bullish Upgrade This fundamental shift has not gone unnoticed by institutional analysts. Bank of America recently provided a powerful endorsement, raising its price target on Caterpillar to $825 from $735 and maintaining a Buy rating . The BofA analysts specifically pointed to the demand for Caterpillar's turbines from sectors outside of data centers as well, using this diversification to argue that fears of excess or "frothy" demand in the AI power space may be unwarranted. They see a durable, multi-year cycle for power generation that supports a re-rating of the entire company . However, the analyst community is not monolithic in its optimism. While BofA's $825 target represents the high end of the spectrum, other firms have struck a more cautious tone. Bernstein recently maintained a Hold rating with a $678 price target, and there has been notable insider selling, including a recent transaction by Group President Rodney Shurman, which can sometimes give momentum-focused investors pause . The wide range of price targets—from a low of $425 from Morgan Stanley to BofA's $825—underscores the intense debate on Wall Street about how much of the AI-powered growth is already priced into the stock . Financial Strength and Lingering Risks Underpinning the bull case is Caterpillar's robust financial performance. The company generated a staggering $9.5 billion in free cash flow in 2025, allowing it to return $7.9 billion to shareholders through dividends and buybacks . This financial discipline provides a solid floor for the investment thesis. Yet, significant risks remain. The company faced $1.7 billion in tariff-related headwinds in 2025 and expects those costs to increase by another $800 million in 2026, which could pressure margins . Furthermore, while the Power & Energy segment booms, other areas like Resource Industries have shown weakness due to lower coal prices affecting mining sales . The Verdict: A Stock at a Crossroads For investors considering Cramer's implicit question—should you buy Caterpillar here?—the answer is nuanced. The company has successfully pivoted its narrative from a cyclical industrial play to a critical enabler of the AI revolution. The record backlog and the surge in the Power & Energy unit provide tangible evidence that this is more than just hype . The stock's 270% total return over five years and its consistent outperformance of the broader industrials sector validate that the strategy is working . However, with a forward P/E hovering around 33, the stock is undeniably priced for perfection . The risk lies in whether the AI data center buildout can sustain its torrid pace and whether Caterpillar can navigate tariff pressures and potential slowdowns in its legacy businesses . For the long-term investor who believes in the secular trend of AI infrastructure buildout, Caterpillar offers a rare combination of deep industrial roots and high-tech growth exposure. For the trader looking at the 28% year-to-date gain, the question Cramer poses is whether the individual investor—who has largely been on the sidelines—will now be the marginal buyer to push the stock past the $800 mark and beyond