Companies outside of the tech sector would benefit from some involvement in the data center boom, CNBC’s Jim Cramer suggested on Wednesday, using recent earnings from manufacturer Caterpillar as an example.
He said the Federal Reserve’s decision to lower interest rates by 25 basis points is positive for a broad swath of companies in the “real economy,” a term he used to group some types of business activity beyond the AI boom. But he indicated the cut might not be enough really boost stocks.
“This rate cut is great news for the so-called real economy,” Cramer said. “But as you can see from Caterpillar, the best-performing companies in the real economy are the ones that also have a ton of exposure to the data center economy.”
Industrial equipment maker Caterpillar reported better-than-expected results on Wednesday, sending the stock up more than 11% to reach a new 52-week high. The quarter was driven in part by strong demand for equipment related to power generation and the data center.
Cramer said former Caterpillar CEO Jim Umpleby was able to turn the company from a “perennially boom and bust” outfit to a “secular growth story” by emphasizing turbines and power equipment. Caterpillar’s construction products are necessary to build a lot of different things. Cramer said, but suggested power is especially valuable as data center proliferation continues.
He compared Caterpillar to Generac, which makes backup generators. He said the company has some data center exposure, but “clearly not enough,” noting that the stock dipped on Wednesday after earnings failed to impress.
To Cramer, Generac didn’t “bet big enough on the data center.”
“Many of the companies in the so-called real economy have only themselves to blame for missing out on the data center boom,” he said.
Caterpillar and Generac did not immediately respond to request for comment.
