PENG vs. APLD: Which AI Infrastructure Stock Has Better Potential?

Per the Mordor Intelligence report, the global AI infrastructure market is projected to reach $202.48 billion by 2031, driven by rapid AI adoption, expanding data-center capacity and growing computing requirements. This creates solid opportunities for both companies. Let’s analyze which AI Infrastructure stock offers the better investment opportunity now.

The Case for PENG Stock

Penguin Solutions is strengthening its position as an AI infrastructure and memory provider through a full-stack AI Factory Platform spanning ClusterWareAI, MemoryAI, ComputeAI, OriginAI and end-to-end design, build, deployment and managed services. Its differentiated exposure is increasingly centered on the memory bottleneck created by inference and agentic AI workloads.

Recent financial performance is a major strength. In the third quarter of fiscal 2026, revenues reached a record $479 million, up 48% year over year, while non-GAAP operating income rose 67% to $64 million. Integrated Memory revenues surged 111.4%, driven by strong AI-driven DRAM and Flash demand, and non-hyperscale AI infrastructure also gained momentum. Importantly, PENG's AI-driven businesses accounted for 74% of total sales and grew 104% year over year, underscoring the strength of the company’s AI-focused portfolio. Reflecting this momentum, management raised its fiscal 2026 revenue-growth guidance to 22% ±2% and non-GAAP EPS guidance to $2.60 ±$0.05, signaling confidence in sustained growth.

The opportunity is supported by customer expansion, including Deepgram, a Tier-1 financial institution, Haein and sovereign deployment Spectra, alongside NVIDIA and Dell partnerships. Product innovation provides another potential growth lever. PENG's MemoryAI KV Cache Server is designed for inference and agentic AI workloads and targets up to 2x higher inference performance, up to 8x lower time-to-first-token latency and 4x-5x greater cost-effectiveness than GPU HBM.

PENG’s growth comes with risks, including memory-price volatility, supply constraints, customer concentration, competitive pressure, tariffs and technology shifts. Significant working capital requirements are exerting additional pressure, as inventory levels have reached $498 million and operating cash flow saw an outflow of $75 million in the third quarter of fiscal 2026.

The Zacks Consensus Estimate for PENG's fiscal 2026 and 2027 earnings is pegged at $2.6 and $3.4 per share, respectively. While the estimates remain unchanged over the past 30 days, both have been revised upward over the past 60 days, implying year-over-year growth of 36.84% and 30.77%, respectively, and indicating sustained long-term growth momentum.

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The Case for APLD Stock

Applied Digital offers significant exposure to the AI infrastructure buildout, but the investment case carries substantial capital, execution and financing risks. Fiscal 2026 investing cash outflow reached $2.9 billion, driven largely by about $2.2 billion of property-and-equipment investment, while long-term debt borrowings increased by $4.1 billion. APLD also reported a $250.3 million net loss attributable to common stockholders for fiscal 2026.

Applied Digital’s AI/HPC data-center strategy is highly capital-intensive. It requires substantial upfront expenditure on land, power infrastructure, buildings, cooling systems, electrical equipment and other facility developments. The company spent $3.04 billion on capital expenditures in fiscal 2026, of which nearly $2.99 billion was associated with the HPC Hosting Business, compared with $976.5 million in the prior year. Significant property-and-equipment investments are expected to continue through fiscal 2027, keeping capital requirements elevated.

Customer concentration adds another layer of risk. One HPC customer represented 59% of continuing-operations revenues, while the HPC segment had only three customers. This creates meaningful dependence on a small customer base, making lease commencement, expansion and retention particularly important to future results. Intense competition exists among established operators like Digital Realty and Equinix, hyperscalers building their own facilities, private developers and competitors ranging from crypto to HPC sectors. Construction delays, permitting issues, the availability of labor and equipment, power outages, rising costs and technological changes can also exert pressure on profitability.

Still, APLD’s AI infrastructure business is gaining meaningful momentum. The HPC Hosting segment benefited from the ramp-up of its first data center at Polaris Forge 1, driving a sharp improvement in segment profitability as operations scaled and tenant activity increased. As of May 31, APLD had 1.41 GW of contracted critical IT load and about $36.2 billion of 15-year contracted revenues across five campuses. Its power-advantaged sites, liquid-cooled, high-density designs and repeatable AI Factory model provide differentiation. The company is marketing another 1.7 GW and pursuing 1.2 GW of natural-gas generation, while higher rental rates and potential customer expansions could support future growth.

For fiscal 2027, the Zacks Consensus Estimate projects a loss of $1.09 per share, with the estimate widening by 9 cents over the past 30- and 60-day periods. This compares with a loss of 91 cents reported for fiscal 2026, suggesting that the substantial AI infrastructure opportunity has yet to translate into near-term earnings growth and underscoring the execution risk embedded in the stock.

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PENG Shares Outperform APLD

Penguin Solutions has decisively outperformed Applied Digital year to date, with PENG shares soaring 170.7% compared with APLD’s 15.1% gain, highlighting significantly stronger investor momentum and market confidence in PENG’s growth prospects.

PENG’s stronger stock performance has been supported by record financial results, accelerating AI-driven demand, robust memory growth and an improved fiscal 2026 outlook, reinforcing the company’s growth narrative.

In contrast, APLD’s more muted performance likely reflects investor concerns surrounding its capital-intensive AI infrastructure expansion, continued losses, customer concentration and execution risks as it scales its data-center footprint.

PENG vs. APLD Stock’s Performance

Image Source: Zacks Investment Research

Valuation: PENG Is Cheaper Than APLD

From a valuation standpoint, PENG looks more attractively valued, trading at a forward 12-month Price/Sales ratio of 1.25X compared with APLD at 7.95X, which appears relatively expensive. Penguin Solutions' lower valuation offers investors a more reasonable entry point than APLD, making it an attractive option at current levels.

PENG vs. APLD: P/S F12M Ratio

Image Source: Zacks Investment Research

Conclusion

Based on these factors, PENG stands out as the stronger AI infrastructure stock, supported by faster growth, rising AI demand, stronger market momentum and a significantly more attractive valuation than APLD.

Currently, PENG sports a Zacks Rank #1 (Strong Buy), while APLD carries a Zacks Rank #5 (Strong Sell). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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