Industrial engine manufacturers, traditionally known for heavy machinery, are now major beneficiaries of the artificial intelligence boom. Companies like Caterpillar and Cummins are seeing massive demand for their generators to power energy-intensive AI data centers. This surge in orders is rapidly transforming their business segments, with power generation now accounting for a growing share of their total sales. Caterpillar's power generation segment, for instance, increased from 8.4% of total sales in 2021 to over 14% in the first nine months of this year. Cummins reported $2.6 billion in power-generation equipment sales to the data center industry last year, expecting a 30% to 35% growth this year.
This unexpected demand has led to record backlogs for these manufacturers. Caterpillar reported a record $63 billion backlog in Q1 2026, an approximately 79% year-over-year increase, with the Energy & Transportation segment specifically noted for data-center-driven power generation. Cummins' large genset allocation has reportedly extended into 2028. Lead times for large generator units from major Western OEMs now range from 40 to 107 weeks, meaning orders must be placed well in advance of data center construction. To address this, Caterpillar is investing $725 million in expanding its Lafayette, Indiana Large Engine Center, aiming to triple large reciprocating engine output by 2027.
The shift is also driven by data centers moving from using generators strictly for backup to employing them as primary power sources. This change is partly due to long utility grid interconnection queues, which can delay power access by three to seven years. Hyperscalers are pivoting to natural-gas turbines and reciprocating engines to run on-site generation as the primary source. This “picks-and-shovels” trade has elevated the stock prices of Caterpillar and Cummins, with both hitting all-time highs and outperforming even major data center customers like Amazon, Meta, and Microsoft over the past year. Analysts are increasingly bullish, with the percentage recommending a “buy” for Cat rising from 41% to 54% over the past year, and for Cummins from one-third to half.
