Artificial intelligence (AI) has been the only recurring investment theme in the market over the past three years. But now Wall Street is starting to look beyond the usual semiconductor names for the next wave of market leaders.
Two industrial giants, Caterpillar (CAT) and Rockwell Automation (ROK), look enticing as they continue to capitalize on massive investment trends that go far beyond just AI.
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Caterpillar (CAT): Benefiting From the Global Infrastructure Boom
Despite tariffs and geopolitical uncertainty, the demand for construction, mining, energy, and data center infrastructure remains intact. And Caterpillar, being one of the world's largest manufacturers of heavy equipment and industrial machinery, is benefiting from it. It designs, manufactures, and services equipment used in the construction, mining, energy, transportation, and infrastructure industries.
Valued at a market cap of $436.7 billion, CAT stock has surged 67% year-to-date (YTD), outperforming the S&P 500 Index ($SPX) gain of 10%.
www.barchart.com In the first quarter, Caterpillar’s revenue surged 22% year-over-year (YoY) to $17.4 billion, while adjusted earnings per share climbed 30% to $5.54. Furthermore, Caterpillar's backlog surged to an all-time high of $63 billion, up 79% from a year earlier. While Caterpillar is not a tech or AI company, the explosive demand for power infrastructure supporting AI and cloud computing is responsible for this growth. Sales to users within the Power & Energy segment increased 32%, led by a remarkable 48% jump in Power Generation demand. Specifically, large generator sets and turbines used in data center projects led to this growth.
Additionally, the construction business also rose 38% YoY, benefiting from healthy non-residential construction activity. Caterpillar is a dividend-paying stock, and healthy cash flows support this. The company generated $600 million in free cash flow, returning $5.7 billion to shareholders through dividends and share repurchases. The company also maintains a strong balance sheet, holding $4.1 billion in enterprise cash and another $1.3 billion in marketable securities at the end of Q1.
The company expects its Power Generation business alone to grow to more than three times its 2024 sales by the end of the decade. In fact, AI infrastructure is driving Caterpillar's long-term growth strategy. Management believes accelerating investment in data centers, cloud computing, critical minerals, reliable power generation, and physical infrastructure positions Caterpillar to capture durable long-term growth while expanding its highly profitable aftermarket services business.
On Wall Street, CAT stock is rated a “Moderate Buy.” Of the 23 analysts that cover the stock, 13 rate it a “Strong Buy,” and 10 rate it a “Hold.” The average target price of $1,005.54 implies the stock can climb by 6% from current levels. But its high price target of $1,218 points to an upside of 28% over the next 12 months.
www.barchart.com Rockwell Automation (ROK): Positioned at the Center of Smart Manufacturing
Rockwell Automation is one of the world's leading providers of industrial automation, factory controls, software, and digital manufacturing solutions. The company's portfolio of industrial control systems, robotics solutions, sensors, and manufacturing software enables companies to modernize production facilities while optimizing performance. In the second quarter of fiscal 2026, Rockwell’s revenue increased 12% YoY, while adjusted EPS surged 32% to $3.30. Notably, strong demand came from data centers, semiconductors, e-commerce, warehouse automation, and energy.
ROK stock has climbed 21% YTD, outperforming the broader market.
www.barchart.com The rapid build-out of AI infrastructure is also boosting industrial automation demand. Data center sales, in particular, doubled YoY in Q2. The company’s Logix industrial controllers grew double digits in the quarter. A notable win for Rockwell was ATS Automation choosing Logix programmable logic controllers for its new AI data center in Texas. This led to Software & Control being the fastest-growing segment for the company, with 17% organic sales growth in the quarter. Similarly, the Intelligent Devices segment grew 9%, led by strong demand for Motion, I/O, and Safety & Sensing products.
While AI infrastructure is the biggest contributor for the company, the demand for Rockwell’s products is expanding across various industries. Notably, automotive sales rose in the mid-teens, while warehouse automation saw a more than 30% increase in sales. Meanwhile, food & beverage sales increased by high single digits, while life sciences sales grew low single digits YoY.
Moreover, Rockwell's cash generation remained solid despite increased working capital needs. It generated $275 million in free cash flow in the quarter and returned $450 million worth of share repurchases. For fiscal 2026, the company expects a 5% to 9% increase in sales growth, while adjusted earnings could increase by 21%. Rockwell Automation is well positioned to benefit from one of the most important industrial transformation trends of the coming decade.
Overall, on Wall Street, ROK stock is a "Moderate Buy." Of the 26 analysts covering the stock, 11 rate it a "Strong Buy," and 15 rate it a “Hold.” The average target price of $480.33 implies an upside potential of 2% from current levels. However, its high price target of $556 implies ROK can climb 18% over the next 12 months.
www.barchart.com On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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