Warren Buffett, known for his long-term investing philosophy, changed his mind on one multi-billion dollar investment in just a matter of months—and it’s all thanks to geopolitics.
In a stock filing on Monday, Berkshire Hathaway revealed that it had sold its entire remaining stake in Taiwan Semiconductor Manufacturing Company, exiting an investment the company had disclosed just six months earlier.
Last November, Berkshire Hathaway revealed that it purchased 60 million American depository receipts in TSMC, worth about $4.1 billion, in the preceding quarter.
Yet Buffett quickly soured on the company. Just one quarter later, Berkshire Hathaway revealed that it had dumped 86% of its total stake.
In an interview with Nikkei Asia in April, Buffett admitted that geopolitical tensions were “a consideration” in selling the shares in TSMC.
Berkshire’s CEO has continued to be concerned about Taiwan as an investment destination since then. “I feel better about the capital that we’ve got deployed in Japan than in Taiwan,” Buffett said at the company’s annual shareholder meeting earlier this month, referring to Berkshire Hathaway’s recent investments in major Japanese trading companies.
“That is the reality, and I’ve reevaluated that in the light of certain things that have been going on,” he said.
Still, Buffett praised TSMC, calling it a “fantastic enterprise” and that “there’s nobody in the chip industry that’s in their league” during the annual meeting.
Geopolitics
China claims sovereignty over the island of Taiwan, considering the territory a renegade province. Beijing has threatened to use force if Taiwan unilaterally declares independence as a separate country.
U.S. politicians have suggested that the country should build closer relations with Taiwan as relations between Washington and Beijing get worse. Both current U.S. Speaker of the House Kevin McCarthy and his predecessor Nancy Pelosi have met with Taiwan president Tsai Ing-wen in the past year, despite complaints from Beijing.
Beijing criticizes any attempt to treat Taiwan as a political entity separate from China, and the country’s military conduct drills near the island in what are widely seen as protests against actions taken by Taiwan’s government or its allies.
Buffett’s concerns have dinged TSMC's stock, with shares in the chipmaker down around 7% since Buffett first revealed he was selling his shares in mid-February. (The broader Taiwanese stock market has been flat over the same period.) Yet hedge funds like Tiger Global Management added TSMC shares to their holdings last quarter, notes Bloomberg.
The semiconductor industry is going through a slump due to a crash in demand for consumer electronics. In late April, TSMC forecast as much as a 16% drop in revenue for the current quarter and a low-to-mid-single digit decrease in sales for the whole year.
