Digital Health Stocks: Investing in the Technology Transforming Healthcare

A few years back my doctor spent half our appointment squinting at a clunky records screen instead of looking at me, and the other half asking questions the smartwatch on my wrist could already answer. That gap between how care actually gets delivered and how good the technology has gotten is exactly where the money is being made. I’ll be honest: this corner of the market is full of genuinely great businesses sitting right next to hype-funded duds, and telling them apart is the whole game.

So here’s my direct answer. Digital health is the broad intersection of healthcare and technology, covering the companies building the software, devices, and data platforms that improve care, cut costs, and modernize a slow industry. For growth investors, digital health pairs recurring software-style revenue with healthcare’s defensive demand, but the category is wide and the quality varies enormously.

There’s real, durable value here, and there’s also a lot of “we put an app on it” marketing dressed up as innovation. Knowing which subsector you’re buying matters more than almost anything else.

What digital health actually covers

The first mistake I see people make is treating digital health as one thing. It isn’t. It stretches from a $300 consumer smartwatch to the operating system a hospital runs its clinical workflow on. Those are wildly different businesses with different customers, margins, and risks, and lumping them together is how you end up buying a story you don’t understand.

The rough size of the global digital health market sits in the hundreds of billions of dollars, with most forecasts I’ve seen projecting low-to-mid teens annual growth for years. I’d treat those numbers as directional, so check current data before you anchor a thesis to a specific figure. The direction of travel matters far more than the decimal points, and it’s clearly up.

What pulls me toward the category is the blend. The best digital health companies look like software businesses, with high gross margins and sticky recurring revenue, yet they sell into healthcare, where demand doesn’t vanish in a recession. That combination is rare, and it’s why I keep coming back even when valuations get silly.

The main digital health categories, side by side

Before I get into any single subsector, here’s how I’d group the major pieces of digital health and what I actually watch in each. The risk column is the point. A wearables maker and an electronic-records vendor are both “digital health,” and they have almost nothing in common as investments.

Category	What they do	Example names	Main risk I watch
Wearables and sensors	Continuously track health metrics on the body	Apple, Dexcom, Abbott	Consumer hardware cycles, commoditization
Electronic health records	Run the digital backbone of hospitals and clinics	Oracle Health, Veeva	Mature core market, slow growth
Telehealth and virtual care	Deliver care remotely over video and apps	Teladoc, Hims & Hers	Thin margins, retention, reimbursement
Remote patient monitoring	Track patients between visits with connected devices	Dexcom, iRhythm	Reimbursement policy shifts
Health AI and data	Apply algorithms to imaging, records, and drug discovery	Tempus, Veeva	Unproven economics, regulation

Tickers and example names shift over time, so treat that table as a map of the terrain rather than a buy list, and confirm any company’s current business before acting.

Wearables: from wellness toy to medical tool

This is the part of digital health most people already touch every day. The shift the market still underrates is wearables crossing from consumer gadgets into genuine medical-grade monitoring. A device that counts steps is a commodity. A device cleared to detect atrial fibrillation or track blood glucose is a different animal, with a bigger market and far stickier demand.

Continuous glucose monitors from companies like Dexcom and Abbott are the clearest example I can point to. They started in diabetes and keep expanding into broader metabolic health. The winners here, in my view, are the ones earning clinical validation and insurance coverage, not just selling another wrist gadget on hardware margins. Coverage is what turns a nice product into a recurring-revenue business.

Remote patient monitoring: the quiet reimbursement story

Remote patient monitoring, or RPM, is one of the less glamorous but more durable corners of the space. The idea is simple: connected devices track a patient’s vitals at home and flag problems to a care team before they become emergencies. Blood pressure cuffs, heart monitors, and glucose sensors all transmit data so a doctor sees trouble early instead of after an ER visit.

What makes RPM investable, in my view, is reimbursement. Medicare now pays for remote monitoring services, which creates an actual revenue pathway rather than a hopeful one, and with well over a hundred million Americans living with chronic conditions the addressable market is enormous. The risk I watch is policy: a favorable reimbursement code is also one that can be changed, so I don’t treat current tailwinds as permanent.

Electronic health records: the boring, sticky backbone

Electronic health records are the least exciting subsector and, in some ways, the most defensible. These systems run patient data, documentation, billing, and care coordination for hospitals and clinics, and ripping one out is a years-long, agonizing project. That switching cost is the moat, and it keeps a health system on a platform for a very long time.

The trade-off is that the core market is mature, so I don’t buy these names expecting explosive growth. What growth remains comes from cloud migration, layering AI onto existing records, and selling more modules into a captive base. I treat EHR players as the steadier ballast end of a digital health allocation, close in spirit to how I think about the Best Medical Device Stocks, where entrenched positions and recurring demand do the heavy lifting.

Where telehealth fits into digital health

Telehealth is the subsector that taught a lot of investors a hard lesson. The pandemic drove a surge in virtual visits, valuations went vertical, and then reality set in: a video doctor’s appointment can be a thin-margin, low-loyalty business if nothing keeps patients on the platform. Several high-flyers gave back enormous gains once growth normalized.

That said, I don’t write the category off. Virtual care is genuinely convenient, and the models that work bundle it with prescriptions, chronic-care programs, or specialty services that build retention. The economics matter far more than the headline visit count. If you want to go deeper on the specific players, I’ve written a fuller breakdown of Telehealth Stocks.

My short version: telehealth is a feature inside a broader care relationship more than a standalone business. The companies that understand that are the ones I’d consider. The ones selling commodity video visits and calling it disruption I’d skip.

How AI is reshaping digital health

You can’t talk about this theme in 2026 without AI, but I try not to wave it around as a magic word. The genuinely valuable applications are specific: reading medical images, flagging anomalies in scans, structuring messy clinical notes, and accelerating parts of drug discovery. These are pattern-recognition problems, exactly what modern AI is good at.

The companies I find most interesting sit on large, proprietary clinical datasets, because in healthcare the data is the moat. A firm with years of imaging or genomic data can train better models than a newcomer, and regulators make that data hard to replicate. This is where digital health blurs into a theme of its own, which I’ve covered in depth in my piece on AI Healthcare Stocks.

My one caution: don’t pay up for the “AI healthcare” label by itself. Ask whether the AI actually improves diagnoses, cuts costs, or clears regulatory hurdles. If a company can’t point to a concrete result, the AI story is mostly marketing, and marketing doesn’t compound.

How I evaluate digital health stocks before buying

Over time I’ve boiled my process down to a handful of questions. None are clever, but skipping them is how people get hurt in a theme this broad.

• Is the revenue recurring or one-time? A subscription to a clinical platform is worth far more than a one-off device sale. I want revenue that shows up again next year without a new sale.
• Does it depend on reimbursement? Plenty of digital health models live or die on what Medicare and insurers decide to pay. A favorable code is great until it changes.
• How high are the switching costs? Records systems and embedded clinical software are sticky. Commodity hardware and undifferentiated apps are not. The moat lives in how painful it is to leave.
• What’s the regulatory exposure? Anything touching diagnosis, devices, or patient data faces FDA and privacy oversight. That can be a moat for incumbents and a wall for newcomers.
• Is there a real path to profit? A lot of these firms grow revenue fast while burning cash. I want a visible line to free cash flow, not just a promise of scale someday.

Because so many of these businesses are really software companies underneath, the same fundamentals carry over: gross margins, net retention, and customer concentration tell me more than any flashy total-addressable-market slide. That overlap is why digital health sits comfortably alongside the broader healthcare ideas I track in my list of the Best Healthcare Growth Stocks.

Fitting digital health into a growth portfolio

Here’s how I personally slot these stocks in. Digital health is a thematic bet, and like any theme it deserves a defined slice rather than the run of the portfolio. I spread my exposure across the subsectors from that table on purpose, so a reimbursement shock to RPM or a telehealth derating doesn’t take my whole position down with it.

I think about the mix in terms of risk. The records and device-adjacent names act as ballast because their demand is sticky and defensive. Telehealth and earlier-stage AI names are the higher-beta sleeve, capable of bigger gains and bigger drawdowns. Blending the two gives me healthcare’s stability with a real shot at growth.

If you’re building a watchlist from scratch, I’d start with the steadier, profitable names for a foundation and add a measured amount of the higher-risk stories on top. For a wider menu of ideas across themes, including names well outside healthcare, my running list of the Best Growth Stocks to Buy in 2026 is where I’d point you next.

The risks I’d never ignore

Let me be blunt about the downside. Reimbursement is the big one. A huge amount of digital health revenue depends on what Medicare and private insurers choose to pay, and those decisions can reprice an entire subsector overnight. I never assume today’s favorable policy is forever.

Regulation is the second. Anything that diagnoses, monitors, or stores patient data answers to the FDA and privacy law, and that scrutiny cuts both ways. Competition is the third and it’s relentless, with big tech, legacy device makers, and well-funded startups all circling. And valuations swing hard, so even an excellent business can be a poor investment at the wrong price. The telehealth crash a few years back was a clean lesson in exactly that.

Frequently asked questions

Is digital health a good investment in 2026?

It can be, but it depends entirely on which subsector and at what price. I’d separate the steadier records and device names from the riskier telehealth and early AI plays before deciding. The long-term shift toward technology in healthcare is real, yet reimbursement risk and valuations matter enormously. I’d treat digital health as one measured slice of a diversified growth portfolio.

What’s the difference between digital health and telehealth?

Telehealth is one slice of digital health, specifically the delivery of care remotely over video and apps. Digital health is the much broader umbrella that also includes wearables, electronic records, remote monitoring, and health AI. Telehealth tends to carry thinner margins and retention risk, while other parts of digital health, like records software, are stickier and more defensive.

How risky are digital health stocks compared to other growth sectors?

It varies a lot by subsector. Entrenched records and device-adjacent businesses are relatively defensive, while telehealth and unproven AI names can be very volatile. The category-wide risks are reimbursement changes and regulation, which can reprice stocks quickly. I’d size the speculative end modestly and lean on the steadier names for ballast within the theme.

Do I need a medical background to invest in digital health?

You don’t need a clinical degree, but you should grasp a few basics: whether revenue is recurring, whether the model depends on reimbursement, and how regulation affects it. Many digital health firms behave like software companies, so the same discipline around margins, retention, and free cash flow that you’d apply to any growth stock serves you well here.

How much of my portfolio should be in digital health stocks?

There’s no universal number, and it depends on your risk tolerance and time horizon. I personally treat digital health as one thematic slice among several rather than a core holding, and I spread it across subsectors so one policy shock doesn’t sink the whole allocation. Size it so a bad year in the sector wouldn’t derail your overall plan.

The Bottom Line

Digital health is one of the more compelling growth stories I follow: a massive, inefficient industry getting rebuilt in software, sensors, and data. But “digital health” is not one thing, and the gap between a sticky records platform and a commodity video-visit app is enormous. Know exactly which business model you own, respect the reimbursement and regulatory risk, and size your positions as if the volatility is coming, because in this space it eventually does. Do that, and this can be a genuinely rewarding place to put growth capital to work.

Last updated: June 2026. Figures are approximate and change — confirm current data before investing. Educational only, not individual investment advice.