Penguin Solutions, Inc. (PENG): A Bull Case Theory 

We came across a bullish thesis on Penguin Solutions, Inc. on ValueInvesting subreddit by digital_odysseus. In this article, we will summarize the bulls’ thesis on PENG. Penguin Solutions, Inc.’s share was trading at $19.74 as of January 29th. PENG’s trailing and forward P/E were 89.73 and 12.48 respectively according to Yahoo Finance.

Penguin Solutions (PENG), formerly SMART Global Holdings, is repositioning itself from a holding company focused on memory and LED products into a pure-play AI infrastructure builder. The company now specializes in architecting and constructing large-scale AI superclusters, such as Meta’s RSC, without manufacturing the chips themselves. This pivot positions PENG in a high-demand segment of AI infrastructure, providing end-to-end solutions that integrate hardware, software, and system engineering.

The company is currently trading at approximately 1x sales, reflecting the market’s underappreciation of its transition and strategic capabilities. A key catalyst for PENG’s growth is SK Telecom’s recent $200 million investment, signaling that the company could become a primary builder for SK’s AI expansion in Asia, potentially unlocking new high-margin contracts and strengthening its regional footprint. While the company generates positive free cash flow, it remains lumpy due to significant working capital requirements for GPU procurement, and its historical earnings have been volatile amid the recent restructuring.

The primary risk lies in whether PENG can sustain a differentiated, high-value position in AI infrastructure or will be commoditized by larger incumbents like Dell, SuperMicro, and HPE. Current market sentiment appears to price PENG as a generic hardware integrator rather than a specialized engineering firm, leaving room for upside if the company successfully demonstrates its technological edge and secures recurring contracts. Overall, PENG presents a compelling, albeit high-risk, turnaround story with potential for significant rerating if its strategic pivot, key partnerships, and AI infrastructure expertise materialize as anticipated, offering investors a combination of deep value and growth optionality.

Previously we covered a bullish thesis on Pure Storage, Inc. (PSTG) by Magnus Ofstad in March 2025, which highlighted the company’s platformization model, 21% growth in annual recurring subscription revenue, and expanding customer base. The company’s stock price has appreciated approximately by 47.52% since our coverage. The thesis still stands as PSTG remains well-positioned in AI-driven cloud storage. digital_odysseus shares a similar perspective but emphasizes Penguin Solutions’ (PENG) pivot to AI infrastructure and upside from SK Telecom’s $200 million investment.

Penguin Solutions, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 29 hedge fund portfolios held PENG at the end of the third quarter which was 25 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.

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Disclosure: None.