AI Sell-Off Spreads to Industrials: Caterpillar, GE Vernova, Vertiv Trapped in Bear Market

The artificial intelligence (AI) rout is spreading across corporate America, as top industrial names that benefited from the boom have turned into laggards, wiping out billions of dollars in market value:

• GE Vernova (NYSE:GEV) fell to $823, its lowest level since March 31 and 31.45% below its year-to-date high. The drop has cut its market value from a peak of $313 billion to $219 billion.

• Caterpillar (NYSE:CAT), recently the best-performing stock in the Dow Jones Industrial Average, fell to $701, matching its April lows and sitting 34% below its year-to-date high. Like GEV, its market value has shrunk sharply, from $490 billion to $322 billion.

• Vertiv Holdings (NYSE:VRT) dropped to $194, down about 49% from its year-to-date high of $378. Its market capitalization has dropped from $144.8 billion to $75 billion.

Internationally, industrial giants such as ABB, Schneider Electric and Siemens Energy have also fallen into bear markets. A bear market is commonly defined as a decline of at least 20% from a recent peak.

The ongoing retreat in industrial companies has coincided with the AI rout that has affected companies like CoreWeave, Nebius, IREN, AMD, and Intel. Memory companies like Micron and SanDisk have also dived. 

The fear among investors is that the momentum experienced in the past few months is about to end. Some popular names on Wall Street like Ken Griffin, Michael Burry, and Ray Dalio have all warned that the industry was in a bubble that may burst as interest rates jump.

On the other hand, some senior executives, including Stephen Schwarzman, Jon Gray and Jensen Huang, have insisted that there is no AI bubble. They argue that the current cycle is backed by strong demand, as shown by the soaring revenues at leading AI labs such as Anthropic and OpenAI.

GE Vernova, Caterpillar, Vertiv Benefit From the AI Boom

These companies have been among the top indirect beneficiaries of the AI boom. Caterpillar has benefited through its Power and Energy division, which has seen its revenue soar because of the rising demand for its generators. Its last earnings report showed that revenue in this division rose by 17% YoY to $8.2 billion, with its operating profit hitting $2.02 billion. 

GE Vernova, on the other hand, has benefited from the rising demand for power and electrification. Its latest results, released in July, showed that its orders jumped by 88% to $24 billion, with the backlog rising by $13 billion. Most of this backlog is in its gas power equipment. 

Vertiv, which is a popular name in data center cooling, also saw its revenues jump by 24% in the second quarter to $3.27 billion. The management expects that the growth will continue in the near future as demand for cooling soars.

In addition to fears of the AI bubble bursting, these stocks have slipped because of the ongoing data center cancellations, which have topped $260 billion this year. Also, investors are likely booking profits since their valuations became stretched. Caterpillar’s forward PE ratio stands at 27, while Vertiv and GE Vernova have 31 and 60, respectively.

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