On the August 27, 2026 episode of Mad Money, a longtime viewer named Jeff from San Francisco listed his top five holdings for Jim Cramer’s diversification game.
The five names, Alphabet, NVIDIA, Apple, Caterpillar, and Eli Lilly, span four sectors and would appear well-balanced under standard sector classification, 247 Wall St. reported.
Cramer’s response flagged a structural shift in revenue that most investors in industrial stocks have yet to absorb.
With Caterpillar reclassified as a data center stock, four of Jeff’s five positions, Alphabet, NVIDIA, Apple, and Caterpillar, all draw revenue from AI infrastructure spending.
The portfolio spans four sectors on paper but is increasingly a concentrated AI bet in practice.
Caterpillar’s second quarter revealed a company in transformation
Caterpillar reported its first $20 billion quarter in Q2 2026, with revenue reaching $20.5 billion for a 24% gain over the prior year. Adjusted earnings per share came in at $8.17, as Caterpillar disclosed in its August 4, 2026, earnings release.
Within the Power and Energy segment, power generation revenue climbed 29% due to demand for reciprocating engines and turbines used in data center applications.
Retail sales to power generation customers surged 72% year over year, and the company’s backlog expanded to a record $72 billion, Utility Dive reported.
Some customers are placing equipment orders as far out as 2030, reflecting the depth of demand for data center construction, Joe Creed, Chairman of the board and CEO at Caterpillar, noted on the earnings call.
That growth profile prompted Cramer to pull Caterpillar out of Jeff’s portfolio entirely.
The market has priced in the shift, with Caterpillar shares up roughly 36% year to date and about 86% over the trailing 12 months through September 2, 2026, Yahoo Finance reported.
The stock trades at a forward price-to-earnings ratio of 23.94, as of September 2, 2026, a multiple more typical of technology names than of industrial peers, Guru Focus confirmed.
Record S&P 500 concentration amplifies the hidden overlap
Caterpillar’s transformation fits a broader pattern, changing what diversification means for investors who hold index funds or build their own stock portfolios.
The ten largest S&P 500 stocks now control nearly 41% of the index’s total market capitalization at the end of 2025, eclipsing the dot-com bubble’s peak of about 27%.
RBC Wealth Management data show the top-10 weighting hovered between roughly 18% and 23% from 1990 through 2015. It has nearly doubled over the past decade, driven largely by AI-linked gains in a small group of mega-cap names.
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Nearly 50 cents of every dollar invested in the S&P 500 now flows into AI-linked stocks, the Kobeissi Letter estimated in a May 2026 analysis.
That means even investors who never bought a single Caterpillar share may have the same hidden AI tilt through a standard index fund.
John Patrick Lee, Product Manager at VanEck, called it an unintentional active sector bet via ETF Trends, while direct holdings like Jeff’s only compound the overlap.
“Investors don’t have to think there’s an AI bubble to be concerned about the concentration risk that AI has wrought,” Morningstar Indexes strategist Dan Lefkovitz warned.
How Cramer proposed to rebalance the portfolio
That concentration profile is exactly what Cramer set out to fix in Jeff’s portfolio. After reclassifying Caterpillar, Cramer needed replacement stocks whose revenue doesn’t rise and fall with data center capital expenditure cycles.
His first pick was TJX Companies, the off-price retailer that posted second-quarter fiscal year 2027 adjusted earnings of $1.22 per share.
Comparable-store sales rose 4%, and TJX raised its full-year adjusted earnings guidance to a range between $5.15 and $5.20 per share.
TJX shares were down roughly 13% year-to-date at the time of the segment, a setup Cramer viewed as an opportunity while management still executes, Yahoo Finance reported.
Christine Benz, director of personal finance and retirement planning at Morningstar, said in an interview that investors who overweight mega-cap growth and technology should consider repositioning toward small-cap value.
<strong>Small-cap value has kind of persistently underperformed the large-cap growth stocks, and I think that arguably there's a pretty good value there, so investors might do a little bit of repositioning so they're not so heavily tilted toward those mega-cap growth and technology stocks,</strong>
Cramer’s second pick was Wells Fargo, which reported second-quarter 2026 earnings of $2 per share on $22.6 billion in revenue, the earnings release showed.
Net interest income rose 5% year over year, while the bank returned $3.0 billion to shareholders through buybacks. The stock serves as a financial-sector anchor, with earnings tied to loan demand and interest rate spreads.
What Caterpillar’s shift means for your next portfolio review
Caterpillar’s shift illustrates a gap between how companies are classified by sector and where their revenue growth originates, one that standard labels alone cannot close.
Lefkovitz noted in his Morningstar analysis that sector classifications can obscure how closely mega-cap holdings are linked. AI concentration cuts across stocks, sectors and themes, making traditional diversification metrics less reliable.
Investors can spot hidden AI overlap by checking each company’s latest 10-Q for revenue details and comparing its forward P/E to that of similar companies.
When multiple positions depend on the same spending cycle, Benz recommended shifting toward non-AI sectors such as off-price retail or regional banking.
