Caterpillar Inc. (CAT) has found itself in what BofA Securities calls the "sweet spot" for on-site data center power. And according to analyst Michael Feniger, the heavy machinery giant isn't just participating in this market—it's dominating it.

Feniger, who maintains a Buy rating with a $650 price target, points to air permit data that tells a compelling story. Caterpillar stands out as the clear leader for backup power solutions, with diesel still winning over natural gas as the fuel of choice. Data centers are deploying both turbines and reciprocating engines to keep the lights on.

Here's why this matters: utility companies keep raising their capital expenditure budgets, but data center construction is still racing ahead of power infrastructure development. That mismatch creates sustained demand for Caterpillar's "bridge-to-grid" solutions through at least 2026-2027.

The company is responding aggressively, more than doubling its capacity to reach 50GW by 2030. That ambitious expansion means Caterpillar will need to push beyond data centers into other markets, Feniger notes. He also flags a potential concern down the road: "BofA sees more risk (down the road) on back up vs. prime."

Price Movement: Shares of Caterpillar climbed 2.65% to $583.13 at the time of publication on Tuesday.