Investing Legend John Templeton Has a Warning for Micron and SK Hynix Investors

Memory chipmakers have been some of the biggest winners of the artificial intelligence (AI) boom in 2026. As large language models expand, memory has proven to be one of the biggest bottlenecks in many systems, driving insatiable demand for chips to package with AI accelerators and graphics processing units (GPUs).

That spike in demand has led to a commensurate spike in pricing since it takes a long time for chipmakers to expand their manufacturing capacity. The result is record profits for the handful of companies that make memory chips, such as Micron Technology (NASDAQ: MU) and SK Hynix (NASDAQ: SKHY).

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Many investors have piled into these stocks on the belief that the current AI build-out is far from peaking. What's more, there's growing sentiment that the sharp earnings cycles that have plagued the industry for decades could be a thing of the past due to the structural demands of AI. As a result, investors should be willing to pay a higher price for the memory chipmakers' earnings today.

But investing legend John Templeton once shared a timeless piece of wisdom that Micron and SK Hynix investors should heed. Investors are at risk of making the same mistake many others have in the past.

The four most dangerous words in investing are "this time it's different," according to Templeton. Templeton used the phrase as a warning against market bubbles and crashes in which valuations deviate from historical norms. The underlying reasoning that the market can support higher pricing or will never turn around always comes back to the same phrase: This time it's different. In fact, the more often you hear or read those words, the more skeptical you should become of their accuracy.

There's a growing chorus of investors claiming that this time it's different for memory chipmakers. Micron and SK Hynix are no longer selling the vast majority of their chips to consumer device manufacturers; they're going to AI hyperscalers. That's a huge structural shift in demand that removes much of the variability caused by consumer sentiment and macroeconomic factors, so the argument goes.

But such reasoning also suggests that this time it's different for the technology investment cycle. There are countless examples of massive capital spending projects ultimately collapsing: Railroad, telecom, and internet infrastructure are three of the most prominent. To think AI will be different is folly. That doesn't mean AI won't be a transformational technology, just as railroads, telecommunications, and the internet were, but it does mean the level of capital spending is unlikely to grow forever.

Even Micron's and SK Hynix's own actions suggest they see the risk of demand dropping. First, they were slow to start building new capacity. Now, with major capital spending and expansion plans underway, they've secured long-term customer agreements to help protect their pricing on the downside.

That may smooth out the earnings cycle somewhat, but it won't prevent the ultimate drop in earnings as chipmakers start depreciating their capital expenditures and incur higher operating costs as they bring new manufacturing capacity online. A decline in demand from the hyperscalers would lead to a severe decline in earnings for Micron and SK Hynix.

Memory chips are particularly vulnerable to cyclicality because they are, for all intents and purposes, commodities. You can package a memory chip from Micron with a GPU, and it'll perform roughly the same as using a chip from SK Hynix. While there are only three main competitors in the DRAM memory chip space, the capacity they build will affect pricing for all of them.

After SK Hynix and Samsung Electronics announced plans to spend over $500 billion on a new facility in Korea and about $1.3 trillion on new capital investments over the next decade, Micron announced an increase in its investments to $250 billion through 2035.

If the manufacturers don't invest now, they leave money on the table. But ultimately, that spending will result in lower profits for everyone as supply catches up to and exceeds demand. So far, the earnings cycle in memory chips has been far bigger than anything we've seen before. But that doesn't mean "this time it's different."

There's an important caveat to Templeton's warning that even he himself admitted: About 20% of the time, it really is different. Perhaps this is one of those instances, but it's impossible to know now. With the tremendous growth in Micron and SK Hynix over the past few months, investors may want to pare down their holdings or exercise significant caution before buying either stock at current levels.

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