AI hype priced into old-economy stocks — fade Caterpillar as Burry smells a top
Thesis
Caterpillar stock nearly doubled this year purely because investors assumed the AI boom would require massive new construction and equipment. But investor hype is fading—the Mag 7 tech stocks just lost $2.3 trillion in value as people question whether this AI spending will actually pay off. As that tech euphoria dies and market volatility spikes to its highest level since 2015, a highly respected investor like Michael Burry publicly betting against Caterpillar signals the perfect breaking point for an overvalued industrial stock that got caught up in the AI hype.
Strategy approach
Build a trend-following short strategy for CAT on D1. Enter short when the stock breaks below its 20-day moving average AND the broader market (SPY) has dropped 3% from its recent 20-day high. Use a 5% stop loss above entry and a 30-day maximum holding period.