Jim Cramer Warns AI Is Making Even “Diversified” Portfolios More Concentrated
Jim Cramer thought Caterpillar gave a viewer's portfolio real diversification until he looked closer and realized one quiet shift in the company's business had turned it into something else entirely.
On a recent episode of Mad Money, Jim Cramer took a call from Jeff in San Francisco, a 20-year viewer, who ran his top five holdings through the “Am I Diversified” game. Jeff’s top 5 holdings were: Alphabet, NVIDIA, Apple, Caterpillar and Eli Lilly. Cramer saw that four of the top five positions carry meaningful AI or tech exposure, making a five-stock portfolio across four sectors less diversified than it appears.
On Caterpillar, “CAT, you know, I used to say that was earth moving. That’s so wrong. And now turbines. It’s really got a lot to do with the data center. We got to be careful. There’s a data center stock,“ Cramer said.
He then reached for an off-theme name to balance his portfolio: “I know TJX is going down. I know that the cheap retailers are good. I know Walmart’s at $102, but I want to do TJX.” He also flagged Wells Fargo as an alternative if the caller exited Caterpillar, and repeated his standing view on Apple and NVIDIA: own them, don’t trade them.
Why Caterpillar Now Trades Like an AI Infrastructure Name
Caterpillar (NYSE:CAT | CAT Price Prediction) reported its first-ever $20 billion sales quarter in Q2 2026, with revenue of $20.54 billion, up 23.98% year over year, and adjusted EPS of $8.17 versus a $6.20 estimate.
Segment revenue reached $8.24 billion, up 17%, with Power Generation up 29% to $3.10 billion, driven by data center demand for large reciprocating engines and turbines. On the call, management said power generation sales to users grew 72%, backlog expanded $9 billion sequentially to $72 billion, and some customers are placing orders as far out as 2030.
The market is already pricing the shift. CAT is up 43.5% year to date and 90.54% over the past year, and trades at a forward P/E of 32 with an average analyst price target of $979.22 vs a current share price of $791.08. That re-rating reflects an industrial carrying AI-linked demand rather than a pure late-cycle machinery play.
Many Companies Benefit from the Same AI Spending
Cramer’s Caterpillar point mirrors an argument JPMorgan Private Bank’s Stephen Parker made: AI is broadening into industrials and utilities.
Consider Generac (NYSE:GNRC), whose data center backlog reached $1.6 billion, including roughly $1 billion of orders in the last 90 days and a first hyperscale deal worth nearly $700 million for 2027 delivery. GNRC is up 44.67% year to date.
Cisco Systems (NASDAQ:CSCO) took $4 billion of hyperscaler AI infrastructure orders in Q4 FY26 and $9.3 billion for the full year, and guided FY27 AI infrastructure revenue to $7.5 billion. CEO Chuck Robbins called it a “networking super cycle.”
Micron Technology (NASDAQ:MU) reported fiscal Q3 revenue of $41.5 billion and non-GAAP EPS of $25.11, with HBM4 12-high ramping twice as fast as HBM3E. MU is up 227.94% year to date.
Why Cramer Chose TJX and WFC to Balance the Portfolio
Having tagged Caterpillar, Cramer needed exposure that doesn’t move with AI capex. TJX Companies (NYSE:TJX) posted Q2 FY27 adjusted EPS of $1.22 on comps up 4%, and raised full-year adjusted EPS guidance to $5.15 to $5.20. The stock is down 11.82% year to date, the kind of setup Cramer sees as an opportunity when management is still executing.
Wells Fargo (NYSE:WFC) reported Q2 2026 EPS of $2 with return on tangible common equity of 17.7%, and CEO Charlie Scharf described underwriting AI-related financing across chips, power, and data-center shell as distinct credit exposures.
Key Takeaways
Cramer’s point is that Caterpillar’s growing data center exposure can reinforce an existing AI bet rather than offset it. Adding a company with different demand drivers, such as TJX, could reduce that concentration without abandoning the portfolio’s technology holdings.
Contact [email protected] for any questions or corrections.
Thomas Richmond is a financial writer and content strategist with 5+ years of experience covering stocks and financial markets. He has published over 250 articles focused on individual stock analysis, helping investors better understand business fundamentals, stock valuations, and long-term opportunities.
Thomas previously served as a Content Lead at TIKR, a stock research platform, where he helped scale the company’s blog to hundreds of articles per month and contributed to a weekly newsletter reaching more than 100,000 investors.
He specializes in breaking down complex companies into clear, actionable insights for everyday investors, with a focus on fundamentals-driven research.
His work has also been featured on platforms including Seeking Alpha and Sure Dividend.
Outside of work, Thomas enjoys weight lifting and soccer.
