This article first appeared on GuruFocus.
Caterpillar (NYSE:CAT), a manufacturer of construction, mining and power-generation equipment, fell approximately 6.2% in Wednesday's regular-session trading as of 11:18 a.m. ET after Baird downgraded the stock to neutral from outperform. The brokerage reduced its price target to $900 from $1,200. Analyst Mig Dobre cited increasing state and local opposition to data-center development, including New York's recently introduced moratorium on new large-scale projects.
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New York's executive order temporarily prevents environmental reviews from advancing for proposed data centers using at least 50 megawatts while the state develops new standards. The decision could matter to Caterpillar because its Power & Energy operation supplies engines and generator systems used to provide electricity for data centers. Baird expects Caterpillar's order and backlog growth to slow during 2027 and 2028 as additional restrictions potentially delay construction and increase development costs.
Caterpillar entered Wednesday with its shares up 47% during 2026 and 96% over the preceding 12 months, reflecting substantial investor enthusiasm for its exposure to AI-related electricity demand. Baird's $300 reduction represents a 25% cut from the brokerage's previous target. Investors may now assess whether data-center restrictions spread beyond New York and whether Caterpillar's existing orders can offset slower project development later in the decade. The company's forthcoming quarterly results could provide additional information about Power & Energy demand, its order backlog and management's longer-term expectations.