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Is PENG a good stock to buy? We came across a bullish thesis on Penguin Solutions, Inc. on EAA Partners’s Substack. In this article, we will summarize the bulls’ thesis on PENG. Penguin Solutions, Inc.'s share was trading at $59.68 as of June 17th. PENG’s trailing and forward P/E were 86.34 and 12.48 respectively according to Yahoo Finance.

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Penguin Solutions, Inc. designs, builds, deploys and manages enterprise solutions worldwide. PENG is transforming itself from a collection of unrelated hardware businesses into an AI infrastructure platform centered on high-performance computing, enterprise AI deployments, and next-generation memory architecture.

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The company operates through three segments—Advanced Computing, Integrated Memory, and Optimized LED—but management has increasingly positioned Penguin Computing as the core identity of the business following the SGH rebrand, divestiture of low-margin commodity memory operations, and wind-down of its Penguin Edge business.

The bullish thesis rests on PENG’s ability to capitalize on the rapid growth of enterprise AI inference workloads through custom AI factories, managed services, and software offerings while leveraging a strategic partnership with SK Telecom and SK Hynix that provides capital, industry relationships, and potential access to advanced memory technologies. Advanced Computing is transitioning away from volatile hyperscaler hardware contracts toward higher-quality enterprise, sovereign AI, government, and research customers, with non-hyperscale AI revenue growing strongly despite headline declines caused by deliberate customer exits.

Integrated Memory is benefiting from AI-driven DRAM demand and the DDR5 upgrade cycle, while the company’s CXL-based MemoryAI products address a critical bottleneck in AI inference by expanding server memory capacity, creating the potential for higher-margin, differentiated revenue streams. Management also sees significant opportunity to grow recurring software and services revenue through its ICE ClusterWare platform and broader AI infrastructure ecosystem.

Additional upside could come from a future divestiture of the LED business, which currently weighs on valuation despite contributing steady cash flow. With a strengthened balance sheet, nearly $500 million of cash, growing exposure to enterprise AI infrastructure, and multiple catalysts tied to AI deployment, memory innovation, margin expansion, and portfolio optimization, Penguin Solutions offers a compelling long-term opportunity if execution continues to validate its transformation strategy.

Previously, we covered a bullish thesis on Pure Storage, Inc. (PSTG) by Magnus Ofstad in March 2025, which highlighted the market’s overreaction to conservative guidance, the strength of its subscription-driven business model, and long-term growth from AI and cloud infrastructure demand. PSTG's stock price has appreciated by approximately 47.64% since our coverage. EAA Partners shares a similar view but emphasizes Penguin Solutions’ transformation into an AI infrastructure platform through enterprise AI deployments, CXL memory innovation, and strategic partnerships.

Penguin Solutions, Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 22 hedge fund portfolios held PENG at the end of the first quarter which was 32 in the previous quarter. While we acknowledge the risk and potential of PENG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PENG and that has 10,000% upside potential, check out our report about this cheapest AI stock.

Disclosure: None.