Staggering Sums: Record Highs and the Rule of Unintended Consequences

All news seems to be good news as we finish April:

GDP growth for the first quarter was released at 2%, a little below expectations of 2.2%, but close enough. The economy is still growing, just a little more slowly.

Growth in investment in artificial intelligence is soaring. Meta, Amazon, Google, and Microsoft came out with earnings. The earnings growth rate was very impressive, but even more impressive was their anticipated capital expenditure investment in artificial intelligence infrastructure: chips, data storage, data centers, and parts I do not even know about. The sums of money are staggering.

The transparency and speculation about the impact of AI is a challenge to understand. The rule of unintended consequences is bound to rise to the top. Regardless, the amount of money being invested across the investor economy is staggering. The speed of change is increasing every day.

Anthropic’s latest program, Mythos, had a limited release because of its ability to find bugs in software across technological, financial, and other applications that can put us at systemic risk. It was released selectively to companies that control the creation and management of macro systems. They were empowered to apply the AI engine to find flaws in their operating software systems before bad actors could find them.

The revenue currently being generated by the major AI companies, OpenAI and Anthropic, is very impressive. But in comparison to their cash burn, not so much. So far, investors seem not to care about the bottom line.

On the other hand, Apple came out with earnings this week, and markets were very impressed. The Apple iPhone 17 set records for iPhone sales. Apple is choosing a less intensive effort at AI, letting the other companies do the heavy lifting. With Apple’s customer data inventory, it is possible to leverage this asset in the future without the infrastructure of the AI companies.

Today, markets reacted to Caterpillar’s earnings as a reflection of international sales and as a bulwark of industrial and manufacturing growth. This report lit a fire under international equities that had been slowing down since the Iran war started.

1. The “Record Backlog” Confidence in the Future

Caterpillar revealed a record order backlog of $63 billion, a staggering 79% increase year over year.

Why it moved markets: This is not just a win for Caterpillar. It signals to international markets that there is a massive wave of construction and energy projects globally that will last for years. It effectively eased fears of a looming global recession.

2. The AI Connection Data Center Boom

In a surprising twist for a heavy machinery company, Caterpillar has become a “hidden AI play.”

Their Energy & Transportation segment saw explosive growth driven by demand for large scale backup power generators for data centers.

Impact: This proved to investors that the AI boom is not just about chips and software. It is creating real world physical demand for industrial hardware, which boosted shares of other industrial giants globally.

3. Resilience Against Tariffs

The report showed that even with significant tariff related cost headwinds, which bit into margins by over $700 million, the company was able to raise prices and increase sales volume.

Why markets liked it: Investors were worried that global trade tensions would crush industrial profits. Caterpillar’s ability to thrive despite these costs suggested that pricing power is still strong in the global economy.

4. Direct International Growth

The specific regional data in the report provided a read through for international stock indices:

EAME Europe, Africa, Middle East: Sales rose 20%, providing a huge boost to European industrial sentiment, which had been lagging.

Asia Pacific: Despite concerns over China’s property market, sales in the region grew 4%, which was better than the doom and gloom many analysts expected.

Pretty impressive.