Missed Out On Micron and Sandisk? Make Sure You Don't Miss Out On This Memory Stock. | The Motley Fool

There’s always a second chance in the stock market. Investors who missed out on Apple and Amazon in the early 2000s had access to picks like Tesla and Nvidia in the 2010s. Even in this past decade, stocks like Palantir minted new millionaires.

Micron (MU -5.63%) and Sandisk (SNDK -6.85%) have built substantial wealth for early investors over the past year. Opportunities like these will exist in the 2030s and beyond, but there’s one growth stock that looks attractive right now and is riding the same tailwinds as the memory chipmakers. Here’s why Penguin Solutions (PENG -7.70%) is worth monitoring.

This memory play is growing faster than people realize

The front-line number, 68% year-over-year revenue growth in the company’s fiscal 2026 fourth quarter, is impressive. However, the metrics are actually more compelling if you look at the company’s key growth segment.

PENG – Penguin Solutions

$57.10-$4.76 (-7.70%)

NASDAQ · As of 4:00 PM ET 10/16/26

Penguin Solutions reports three segments each quarter: advanced computing, integrated memory, and optimized LED. Integrated memory is the most important segment, since it includes key memory products for AI data centers. Its DRAM modules are the top seller, while Penguin Solutions’ CXL memory modules are surging in demand as a recognized solution to the memory wall bottleneck.

CXL enables GPUs to access a memory pool. Without this setup, a single AI chip can crash or slow down an AI model if it runs out of memory. Since CXL solves this problem and Penguin Solutions is one of the few companies already delivering this technology, it has a massive tailwind.

These trends helped Penguin Solutions’ integrated memory segment grow by 158% year over year. It grew much faster than the other two segments and made up 60% of overall sales. As the memory segment grows and accounts for a larger share of total revenue, Penguin Solutions’ revenue and net income growth rates should continue to accelerate.

Penguin Solutions is winning more customers

While consumer-facing companies like Walmart must consistently win over many customers, Penguin Solutions only needs a handful to generate substantial revenue growth. That’s why it was such a big deal when the company won six new AI infrastructure data center customers in the fourth quarter of fiscal 2026.

That customer profile included four neocloud providers, which must aggressively scale out data centers to deliver for customers. The data center scale-out will increase demand for Penguin Solutions’ memory products, especially its CXL products that address the memory wall.

Winning over new customers that are deep in the AI build-out can open the door to meaningful revenue growth rates over the next few quarters or years. Furthermore, each successful implementation of Penguin Solutions’ memory products will attract new customers.

The valuation is a bargain

A good growth story is important for an AI stock, but a ludicrous valuation can sour the thesis. Valuations don’t seem to matter until growth slows down, and then investors are staring at an elevated P/E ratio with a correction being the only viable way to improve the valuation.

Many growth stocks face this problem, but Penguin Solutions is an exception. The stock trades at a 12.5 forward P/E ratio after the misguided correction that has plagued many AI stocks. Net income jumped by 888% year over year in the company’s fiscal 2026 fourth quarter, reaching $93 million in the process. Meanwhile, the stock only trades at a $3 billion market cap.

Penguin Solutions CEO Kash Shaikh told investors that the company’s AI infrastructure business is “accelerating further.” That statement suggests that Penguin Solutions can build on its recent successes.

While the company guided for 40% year-over-year revenue growth in fiscal 2027, it is known for setting moderate guidance and then beating it when it announces earnings. Penguin Solutions has delivered eight consecutive EPS beats, suggesting the valuation could become more attractive to long-term investors.