Caterpillar shares drop after Michael Burry shorts AI rally

Shares of Caterpillar Inc. fell sharply from a record high on Wednesday after prominent investor Michael Burry announced he had taken a short position in the industrial giant, citing concerns over an artificial intelligence-driven rally that has dramatically inflated its valuation. The stock closed down nearly 7% after ending the previous day at an all-time high of $1,064.90.

Burry, known for his successful bet against the U.S. housing market before the 2008 financial crisis, disclosed the move in a Substack post published Tuesday. He said he initiated the short at $1,060.98, marking his first-ever bearish wager against Caterpillar, a company he noted had previously been profitable for him as a long-term investment. The announcement contributed to a broader sell-off in several AI-linked stocks Burry also targeted, including Nvidia Corp., Applied Materials Inc., and the iShares Semiconductor ETF (SOXX).

Caterpillar’s steep decline follows an extraordinary rally largely tied to the AI infrastructure boom. While traditionally a manufacturer of construction and mining equipment, the company has been increasingly viewed by investors as a critical “picks-and-shovels” supplier for data...