President Donald Trump staked his second-term industrial policy on tariffs bringing factories back.
Fourteen months since his return to the Oval Office, U.S. manufacturing is indeed running at its hottest pace in nearly four years — but the engine isn’t trade policy.
It’s artificial intelligence.
- Caterpillar stock is trading at elevated levels. What’s the outlook for CAT shares?
The S&P Global US Manufacturing PMI jumped to 54.0 in April from 52.3 in March, a 47-month high. Production growth hit its fastest pace in four years, with new orders posting the biggest monthly increase since May 2022.
“Manufacturers were their most optimistic since February 2025, and thereby confidence was amongst the highest seen since the pandemic,” S&P Global said.
The AI Tailwind: U.S. Factories Are Running Hot Again
After declining for more than two-and-a-half years, U.S. manufacturing production turned positive last January and has climbed steadily since.
“AI has resuscitated manufacturing activity,” said Bank of America economist Aditya Bhave in a note this week.
Fabricated metals, machinery, computer and electronic products, and electrical equipment are carrying most of the rebound.
The capex math explains why. Hyperscalers — including Microsoft Corp. (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOGL)(NASDAQ:GOOG), Amazon.com Inc. (NASDAQ:AMZN) and Meta Platforms Inc. (NASDAQ:META) — expect to spend close to 2.1% of US GDP on capital investment this year, per BofA’s estimates. One slice of one sector is approaching two-thirds of all U.S. non-residential structures investment.
Tariffs, meanwhile, have been a headwind. S&P Global flagged input-cost inflation at a 10-month high, with war-related disruptions and tariffs cited as supply-chain culprits.
Output is surging despite trade policy, not because of it.
Industrial Demand Has Flipped
BofA multi-industrial analyst Andrew Obin told clients this week to expect a wave of revenue and earnings beats, citing ISM new orders averaging 55.5 in the first quarter versus 47.8 in the fourth quarter of 2025, U.S. manufacturing employment rising for the first time since the fourth quarter of 2022, and accelerating demand from his proprietary distributor channel checks.
“We’ve read the tea leaves for U.S. industrial demand: they are a big green arrow pointing up,” he said.
Which Stocks May Benefit
The AI-manufacturing trade has already minted winners. Here’s the short list of names riding the wave, and what Wall Street has been saying over the past few weeks.
- Caterpillar Inc. (NYSE:CAT) closed at a record $835.24 on Thursday. Earlier this week, Wells Fargo’s Michael Feniger lifted his target from $870 to $960, citing AI and data-center demand tracking three new solar turbines projects for roughly 600 megawatts of power. Shares have rallied 177% over the past year, ranking among the top 20 performers in the S&P 500 over that stretch.
- Vertiv Holdings Co. (NYSE:VRT) is the purest pick-and-shovels name in the group and has the returns to show for it — up roughly 313% over the past year. First quarter sales jumped 30% to $2.65 billion, the company raised full-year guidance to organic growth of 29%-31%, and the backlog sits at $15 billion, up 109% year-on-year. Citigroup moved to $340 price target on April 13, Roth Capital to $335 and Barclays to $300. The partnership with NVIDIA Corp. (NASDAQ:NVDA) on GB200 and GB300 reference designs keeps putting Vertiv at the center of every new AI factory conversation.
- Quanta Services Inc. (NYSE:PWR) laid out a $2.4 trillion infrastructure opportunity through 2030 at its March Investor Day. Backlog hit a record $44 billion. Truist raised the price target to $713 from $643 on April 20, BMO Capital initiated coverage with a Buy, and Jefferies sits at $654. Shares are up 131% over the past year.
- Eaton Corp. plc (NYSE:ETN) hasn’t been as explosive as its peers — shares are up 54% over the past year, the laggard in this group — but the analyst flow has turned sharply positive. Citigroup raised its target to $464 from $435 on April 13, Jefferies and BMO Capital initiated with Buy and Outperform ratings, respectively. On April 8, Eaton announced a $30 million expansion near Omaha to build medium-voltage switchgear specifically for AI data centers.
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