Michael Burry just bet against a 100-year-old industrial company that has been one of his long-time favourite stocks. According to Burry's latest post on Substack, he shorted Caterpillar, whose core business is the sale of construction and mining equipment.
Burry disclosed shorting the stock at $1,060.98. The stock price crashed 6.9% yesterday to close at $991.41. The former hedge fund manager also disclosed shorted Nvidia at $198.09, Applied Materials at $729.40, Tesla at $416.22, and the SOXX semiconductor index at $642.80.
'Not all of these are part of the Bank of America [boosting] Caterpillar stock price target,' Burry wrote. 'The SOXX itself is a pure form of overvaluation in an index, a form that is rarely seen and never so easily recognized as such.'
Burry has long-warned about the dangerous levels of valuations of AI companies. He even claimed to have shuttered his hedge fund because the AI industry trends fundamentally differ from his investment philosophies.
Investors Viewing Industrial Company as an AI Play
Caterpillar valuation skyrocketed in 2026. The stock is up 73% year-to-date and has climbed 153% in the past one year. The construction company's valuation is now higher than at any point in the past three decades.
The company reported robust Q1 results, with adjusted EPS of $5.54 on revenue of $17.4 billion and operating cash flow of $1.9 billion. The company also disbursed $5.7 billion in share repurchases and dividends in a single quarter.
The business clearly isn't broken and Burry said he had never shorted Caterpillar before. 'It has always done great for me on the long side,' he wrote on Substack.
However, the company trades at a trailing P/E ratio of 49.25, a multiple which is not historically associated with a cyclical industrial company amid a normal equipment cycle. The company's order backlog is as high as 79% as new AI data centres continue to require its turbines, generators, and earthmovers.
This trend led markets to reprice a machinery firm as an AI stock. However, its customers mostly respond to commodity cycles and the global macroeconomic landscape. Hence, the massive stock surged over the past year is partly due to genuine business strength as well as a valuation premium set by investors due to the company's infrastructure spending, AI data centre construction demand, and even its inclusion to the Russell Top 50 index.
The Beginning of the End
Although a record backlog offers a robust foundation for continued momentum, investors are paying 49 times earnings to buy the stock of a business whose intrinsic earnings power does not match the current multiple.
Burry's trigger was South Korea. He said that new big chip-fabrication spending announced out of South Korea was the cause of the recent rally, which drove Caterpillar to record highs. 'I see that as the beginning of the end,' Burry wrote.
Burry could be giving a macro signal that the rising AI infrastructure capex, along with climbing valuations, could mean we are closer to the crest of the market cycle than investors believe.
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