BTIG's H1 2026 Picks: The Tactical Shift to Monetizing the AI Era

The core event driving BTIG's picks is a clear market rotation. The firm's January 2 top picks report signals a decisive shift from the speculative frenzy of 2025's AI hardware plays to what it calls the "monetization phase" of technology. This is a tactical pivot: capital is moving away from overextended semiconductor names and into the "application layer" of software and defensive growth sectors. The catalyst is a change in enterprise budgeting, where companies are shifting from buying AI-capable chips to implementing the AI tools that make them work.

This rotation is framed as a move into more fundamental, profitable growth. BTIG's analysts are targeting large-cap companies with market valuations over $10 billion that have built "technical bases" ready for breakout moves. The immediate investment thesis is one of relative value and clearer catalysts. Software and healthcare diagnostics are seen as leading the charge, with names like Atlassian and Guardant Health highlighted for their specific, near-term drivers. This setup contrasts with the broader market's "technically balanced" condition, which lacks the froth that often precedes a major correction. In this environment, stock selection is the primary alpha driver, making BTIG's specific picks a direct response to the new market equilibrium.

Growth Potential and TAM: Quantifying the 'Application Era' Opportunity

The real story behind BTIG's 2026 picks isn't just about technical charts; it's about tapping into massive, secular market shifts. The firm's strategic pivot from AI hardware to the "application layer" identifies a clear, quantifiable tailwind. As enterprises move past the initial capital expenditure phase of AI, their budgets are shifting. The catalyst is a fundamental reallocation: money is flowing from buying expensive, AI-capable chips toward implementing the productivity tools that make AI work. This isn't a fleeting trend; it's a structural budget shift that directly benefits software companies like Atlassian and Monday.com.

Atlassian's own guidance powerfully illustrates the scalability of this growth. The company recently raised its cloud revenue outlook for the 2026 fiscal year to 22.5% year-over-year, a 1.5-point increase that de-risks its path. More importantly, it reaffirmed its long-term target of a 20% compound annual growth rate. This isn't just about a single quarter's beat; it's about a company demonstrating the operational discipline to execute on a multi-year expansion plan. The market size for enterprise collaboration and workflow software is vast and sticky, providing a durable foundation for this growth trajectory.

In medical technology, the tailwind is demographic. Edwards Lifesciences is positioned as a "clean" play on the aging global population, a trend with no cyclical reversals. The company's recent FDA approval for its SAPIEN M3 mitral valve system adds a near-term catalyst, but the long-term opportunity is structural. BTIG's $103 price target reflects confidence in its market leadership and the expanding addressable market for transcatheter therapies. This is a classic example of a company with a large, growing Total Addressable Market (TAM) that is directly benefiting from a powerful, long-term societal shift.

The bottom line is that BTIG's picks are being selected for their exposure to these massive, secular forces. Whether it's the software monetization phase or the aging demographic, the opportunity isn't about a single product launch or a temporary earnings pop. It's about companies that are scaling within markets that are themselves expanding at a steady, predictable clip. This quantifies the long-term tailwinds that support the firm's bullish case.

The Tactical Setup: High-Conviction Picks with Aggressive Price Targets

The sector thesis now crystallizes into specific, actionable setups. BTIG's analysis points to companies where technical patterns align with fundamental catalysts, offering defined risk/reward profiles. For Compass, the key support is the $9-$9.50 range. A break below this level would invalidate the breakout thesis, but as long as it holds, the path to the $12.50 price target remains open. The stock's strong third-quarter results, with revenue of $1.85 billion and record adjusted EBITDA, provide the earnings foundation for this move.

Klaviyo presents a classic base-breakout opportunity. The stock has been forming a base for a year, and its recent 27% year-over-year increase in Black Friday sales to $3.8 billion validates its growth engine. The critical technical level is the $35-$37 resistance. A decisive break above opens a clear path to the $40-$50 target. The appointment of a new co-CEO adds a near-term catalyst to watch for execution.

Rocket Companies offers a high-conviction, low-conviction setup. After a multi-year decline, the stock is building a base with key resistance at $21.50-$22. The stock's recent beat on adjusted revenue and earnings provides a floor, but the real move depends on clearing that resistance. The $25 price target implies a significant re-rating from its current depressed levels.

The bottom line is that these are tactical plays, not long-term holds. Each setup hinges on a specific price level being respected. The magnitude of the upside targets-ranging from 20% to over 100%-reflects the aggressive nature of the BTIG thesis, which sees these as late-cycle opportunities where technicals and fundamentals converge.

Risks and What to Watch: Guardrails for the Rotation

The rotation BTIG is calling for is a tactical shift, not a structural overhaul. Its success hinges on a fragile narrative: that companies can now monetize their growth with healthy margins. The primary risk is a failure of that "profitable growth" thesis. If the software and healthcare names leading the charge miss on execution or face unexpected margin pressure, the entire rotation could stall. The market's move into the "application layer" assumes enterprises are ready to spend on productivity tools and diagnostics. Any hesitation would quickly reverse the trend.

Macro shifts are the other major guardrail. The favorable setup for mortgage stocks and consumer discretionary picks depends heavily on interest rates. BTIG's analysis points to anticipated declines in interest rates as a key driver for mortgage originations and affordability. A delay or reversal in the Fed's easing path would immediately challenge that thesis, tightening credit conditions and cooling demand. Investors must watch the bond market for signals on the rate trajectory.

Finally, the sustainability of the rotation itself will be confirmed or broken by relative performance. The core trade is a shift from hardware to software, from speculative infrastructure to monetizing applications. A reversal here-where hardware names regain momentum-would signal the rotation is not a fundamental reallocation but a temporary pause. The trend BTIG notes of software stocks closing the performance gap with hardware in late 2025 needs to accelerate through the first half of 2026 to validate the thesis. Watch the sector charts closely; the rotation's durability will be written in the relative strength of these two camps.