MarketWatch Momentum Stock Picks: AI Infrastructure and Clean Energy Lead 2026 Rally

This analysis is based on the MarketWatch report [1] published on January 22, 2026, which identified 20 stocks demonstrating strong momentum characteristics ranked by trailing 12-month returns. The momentum stock landscape reveals a concentrated thematic play around AI infrastructure, clean energy transition, and emerging technologies, while simultaneously presenting valuation challenges that have drawn attention from prominent market commentators including Jim Cramer, who characterized Bloom Energy’s multiple as “dangerous” [4]. The integration of multi-dimensional analysis across market data, technical indicators, and fundamental metrics reveals a complex risk-reward dynamic that momentum investors must navigate carefully.

The momentum stocks identified cluster around three primary investment themes that reflect broader structural shifts in the global economy. The AI infrastructure theme encompasses Bloom Energy and Lumentum, both benefiting from massive capital expenditure cycles by hyperscalers and enterprises deploying AI workloads. Bloom Energy’s 62.1% monthly surge reflects not merely speculative interest but tangible business developments, including confirmed utility partnerships with American Electric Power and a documented shift to sustained profitability with earnings projected to grow 150% [2][3]. The company’s fuel cell technology addresses a critical constraint in data center deployment—the availability of reliable, clean power at scale—making it a strategic beneficiary of AI expansion rather than a tangential beneficiary.

Lumentum’s positioning in optical networking creates similar structural demand characteristics, as AI infrastructure requires high-bandwidth, low-latency connectivity between computing resources. Oppenheimer’s favorable coverage of Coherent, Ciena, and Lumentum within the optical networking space suggests institutional recognition of this thematic exposure [5]. The stock’s 10% pre-earnings climb ahead of the February 3, 2026 report indicates elevated expectations that the company will demonstrate continued momentum in its photonic and 3D laser platforms showcased at Photonics West 2026 [6].

D-Wave Quantum (QBTS) represents a distinctive addition to the momentum universe, reflecting investor appetite for emerging technology categories approaching commercial viability. The company’s achievement of quantum supremacy in materials simulation using its Advantage2 system represents an industry first [7], while the completed Quantum Circuits acquisition adds error-corrected gate-model technology to its dual-platform roadmap [8]. The most striking aspect of D-Wave’s profile is its cash position—$819.3 million representing a 1,900% year-over-year increase—providing substantial runway for continued development and commercialization efforts. Enterprise adoption indicators are encouraging, with contracts secured from E.ON, GE Vernova, NTT Data, and Fortune 500 aerospace companies suggesting transition from experimental to operational quantum computing use cases.

The substantial biotechnology weighting across Kodiak Sciences (KOD), Celcuity (CELC), Cogent Biosciences (COGT), and Terns Pharmaceuticals (TERN) introduces binary outcome characteristics that differentiate the momentum basket from purely technology-focused lists. Kodiak Sciences’ 233% one-year surge demonstrates the magnitude of returns possible when biotech catalysts align, though the stock’s high beta of 2.67 and lack of revenue create asymmetric risk profiles [9]. The J.P. Morgan Healthcare Conference presentation and breakout to new 52-week highs near $31.18 indicate ongoing positive sentiment, but clinical trial outcomes remain binary events that could produce significant directional moves in either direction.

The simultaneous presence of extreme valuations and strong fundamental catalysts creates a distinctive risk-reward dynamic within the momentum universe. Bloom Energy’s trailing P/E of 1,797 and forward multiple of 150x [4] would typically exclude a stock from serious consideration for many value-oriented investors, yet the company’s profitability turnaround, utility partnerships, and 150% earnings growth projection provide fundamental justification for elevated multiples. The critical insight is that momentum investing operates on a different timeframe and return distribution assumption than traditional valuation frameworks—accepting higher entry multiples in exchange for participation in continued multiple expansion and earnings acceleration.

The Jim Cramer warning about “dangerous” valuations [4] should be contextualized within his broader investment philosophy rather than as a definitive negative signal. Cramer’s commentary often highlights stocks where sentiment has potentially outrun fundamentals, serving as a contrarian indicator rather than a fundamental assessment. The 49% drawdown Bloom Energy experienced from November highs to mid-December lows [4] demonstrates that extreme valuations do not prevent significant corrections, yet the subsequent recovery to new 52-week highs suggests underlying demand persists despite valuation concerns.

The technical analysis reveals that most momentum stocks have entered sideways consolidation patterns following their respective rallies, creating potential continuation or mean-reversion scenarios [0]. Bloom Energy’s MACD remaining bullish while KDJ turns bearish indicates conflicting momentum signals that often precede directional resolution. Lumentum’s bearish MACD crossover combined with bullish KDJ similarly suggests uncertainty about near-term direction. For momentum investors, these consolidation phases represent both opportunity and risk—potential breakout opportunities if resistance levels are cleared with volume confirmation, or mean-reversion risks if support levels fail to hold.

The volume analysis provides additional context for these technical patterns. Lumentum trading at 72% of average volume, Cogent Biosciences at 83%, and EchoStar at 78% suggest that recent price action has occurred without extraordinary participation, potentially indicating sustainable trends rather than parabolic blow-off tops [0]. However, Celcuity’s 27% of average volume and Terns’ 25% of average volume warrant attention, as low-volume moves can reverse quickly on increased participation.

The biotechnology sector’s representation across four of eight highlighted stocks (KOD, CELC, COGT, TERN) creates concentration risk that momentum investors should actively manage. Biotechnology outcomes depend heavily on clinical trial results, regulatory decisions, and partnership announcements—events that can produce binary stock movements independent of broader market conditions. Cogent Biosciences’ pending FDA decisions and Kodiak Sciences’ lack of revenue despite 233% price appreciation highlight the speculative component within this subsector.

The diversification benefit comes from the sector spread across clean energy, technology, quantum computing, biotechnology, and satellite communications. EchoStar’s satellite communications positioning and Bloom Energy’s clean energy focus provide non-correlated exposure within the momentum basket, potentially reducing portfolio volatility compared to technology-only momentum strategies.

: The most immediate risk across the momentum universe is potential multiple contraction. Bloom Energy’s 150x forward earnings and Lumentum’s 217x P/E [4] provide limited downside protection if sentiment shifts or growth disappoints. Historical precedent exists—Bloom Energy’s 49% drawdown from November highs [4] demonstrates that extreme valuations do not prevent significant corrections. Investors should recognize that momentum stocks typically derive a substantial portion of returns from multiple expansion, meaning valuation risk represents both return ceiling and downside vulnerability.

: Technical analysis reveals that several momentum stocks have experienced substantial drawdowns before recovering. Bloom Energy’s late-2025 correction, D-Wave Quantum’s 42% distance from 52-week highs [0], and Terns Pharmaceuticals’ 25.7% distance from highs all indicate that momentum investing involves accepting significant volatility in exchange for potential continued appreciation. The high-beta characteristics of stocks like Kodiak Sciences (2.67) and Bloom Energy (3.02) [0] amplify both gains and losses, requiring appropriate position sizing and risk management.

: The biotechnology stocks face clinical trial and regulatory catalysts that can produce 50%+ moves in either direction within short timeframes. Kodiak Sciences’ lack of revenue and heavy R&D spending means the stock price reflects pipeline expectations rather than demonstrated commercial viability. Cogent Biosciences’ pending FDA decisions represent upcoming binary events that could substantially alter the stock’s trajectory.

: High-beta momentum stocks historically exhibit elevated sensitivity to interest rate changes and risk appetite shifts. The current interest rate environment and Federal Reserve policy trajectory will significantly influence the sustainability of momentum strategies. A shift toward risk aversion could disproportionately impact high-valuation, high-beta stocks.

: The structural demand for AI computing infrastructure creates a multi-year tailwind for companies providing enabling technologies. Bloom Energy’s fuel cells address power constraints that limit data center capacity expansion, while Lumentum’s optical components enable the high-bandwidth connectivity required for distributed AI workloads. These positions suggest exposure to a durable growth theme rather than cyclically elevated demand.

: D-Wave Quantum’s enterprise contracts [7] indicate that quantum computing is transitioning from research to operational use cases. The substantial cash position provides runway for continued development, while the dual-platform approach combining annealing and gate-model systems positions the company to address diverse quantum computing applications.

: The mixed analyst ratings on Bloom Energy—HSBC at Buy with $150 price target, TD Cowen at Hold with $105 target, Evercore ISI at Outperform with $100 target [3]—indicate genuine disagreement about appropriate valuation. This dispersion creates opportunity for investors who can form an independent view on the company’s trajectory. Similarly, EchoStar’s TD Cowen Buy rating with $158 target versus Citigroup’s Neutral rating with $111 target [11] suggests potential upside if the satellite communications thesis plays out.

: Stocks approaching their 52-week highs with strong volume and catalyst support offer asymmetric risk-reward opportunities. EchoStar’s 4.1% distance from highs, Celcuity’s 4.9% distance, and Cogent Biosciences’ 8.6% distance suggest limited upside required to establish new highs, which could trigger additional buying from technically-oriented investors.

The MarketWatch momentum stock selection for January 2026 reflects concentrated exposure to AI infrastructure and clean energy themes, with supplementary representation in quantum computing and biotechnology sectors. Bloom Energy’s 62.1% monthly surge and profitability turnaround represent the strongest fundamental momentum story, though Jim Cramer’s “dangerous” valuation characterization [4] highlights the risk of entry at elevated multiples. Lumentum’s optical networking positioning benefits from AI infrastructure deployment but trades at 217x P/E, requiring continued execution to justify valuations.

Technical analysis indicates most momentum stocks have entered consolidation phases following rallies, with MACD and KDJ indicators showing conflicting signals across the universe [0]. The biotechnology weighting introduces binary outcome risk that investors should actively manage through position sizing and diversification. D-Wave Quantum’s quantum supremacy achievement and enterprise contract wins provide exposure to an emerging technology category with substantial cash reserves supporting continued development.

Risk management for momentum investing requires accepting elevated volatility in exchange for potential continued appreciation. The historical pattern of significant drawdowns followed by recoveries—demonstrated by Bloom Energy’s 49% late-2025 correction [4]—suggests that momentum strategies require patience and conviction during drawdown periods. Position sizing, stop-loss discipline, and diversification across sectors within the momentum universe represent appropriate risk management approaches for investors pursuing this strategy.

The fundamental backdrop for AI infrastructure and clean energy themes remains constructive, with enterprise AI adoption and decarbonization mandates providing structural demand support. However, the extreme valuations across the momentum universe mean that returns are heavily dependent on continued multiple expansion, creating vulnerability to sentiment shifts or growth disappointments. Investors should maintain realistic expectations about return distributions and recognize that momentum investing involves accepting above-average risk in pursuit of above-average returns.