Key Points
Penguin Solutions' CXL products serve a key role in AI data centers by ensuring that GPUs have access to the memory capacity they require.
The company's integrated memory segment is growing rapidly, and as it becomes a larger part of total sales, Penguin Solutions' revenue growth rate could accelerate.
Penguin Solutions is strengthening its relationships with hyperscalers, and its $3 billion market cap gives it plenty of room to grow.
Micron's (NASDAQ: MU) stock price has roughly tripled this year even though it has been slipping down and sideways for the past few months. Demand for its memory chips remains extremely strong, and its revenue rose by almost 400% year over year in its fiscal 2026 fourth quarter.
Micron CEO Sanjay Mehrotra projected an even stronger fiscal 2027, but that doesn't mean investors should rush to buy the stock. If you're looking for an investment that will let you capitalize on this booming market for memory, Penguin Solutions (NASDAQ: PENG) may be the better pick as CXL memory products start to gain traction.
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CXL solves an emerging bottleneck
CXL memory products like those Penguin Solutions creates address an issue that the tech sector calls "the memory wall." If one GPU in an artificial intelligence server rack runs out of memory space, it can slow down or pause the entire system. CXL memory products provide a memory pool that any GPU in the server can access when it runs out of memory, helping keep the whole rack operating efficiently.
Penguin Solutions is already working with hyperscalers, and its revenue is accelerating. Sales jumped by 68% year over year in its fiscal 2026 fourth quarter (which ended Aug. 28), and the company expects sales growth of 30% to 50% in fiscal 2027.
That's similar to the guidance Micron delivered to investors when announcing its latest results. However, Penguin Solutions is growing faster than most investors realize. Its memory segment almost tripled in size year over year and accounted for 60% of total revenue, while its other segments grew moderately.
As memory becomes a larger piece of Penguin Solutions' total business, its revenue growth should accelerate. Profit margins have also been trending higher as its memory segment gains traction.
Penguin Solutions is a much smaller company
Market caps do not tell the entire story, but when two companies are both achieving exceptional growth, their total values can matter in the comparison between them as investment options. And in this case, market cap certainly is worth considering.
Micron's market cap today is around $915 billion, while Penguin Solutions has a market cap just above $3 billion. It's far more feasible for Penguin Solutions to go from a $3 billion market cap to a $30 billion market cap than it would be for Micron to climb to $9 trillion.
As Penguin Solutions' products gain more traction and the company delivers wins for hyperscaler customers, it has the potential to sign long-term deals that could become quite lucrative over time. For Micron, most of the upsurge is in the rearview mirror, and it has already signed numerous multiyear sales deals with the largest tech companies.
One key part of deciding whether or not to buy a stock involves assessing the company's future growth opportunities as opposed to its recent wins. Micron has already tapped into a far larger share of the total memory market than Penguin Solutions has. That means Penguin Solutions doesn't need as many additional sales or new long-term deals to double or triple its revenue from where it stands now.
Both stocks look compelling, but from the perspective of which one has the greater chance to 10x from here, Penguin Solutions could be the better opportunity.
Marc Guberti has positions in Penguin Solutions. The Motley Fool has positions in and recommends Micron Technology and Penguin Solutions. The Motley Fool has a disclosure policy.