Mere months after Berkshire Hathaway bought a $5 billion stake in Taiwan Semiconductor Manufacturing Co., the Warren Buffett-helmed conglomerate slashed its holdings in the tech company by 86%, reports an article in Bloomberg. The abrupt about-face from Buffett, who’s famously said his favorite holding period is forever, has dampened investor sentiment towards TSMC, and the stock fell 4% in the wake of the news, though it’s still up 40% from its October low.
Supply chain disruptions stemming from the pandemic and China’s zero-Covid policies have battered the chip industry, as well as decreased demand and raging inflation. Last year, after the U.S. government imposed new restrictions on Chinese access to crucial technologies, TSMC reduced its spending target by roughly 10%. The tensions between the two countries has led to the U.S., Japan, and Europe all pressuring TSMC to build manufacturing centers outside of Taiwan—an expensive endeavor, to be sure. But by the end of last year, the company’s stock was flying high after its October low point, hitting almost 14 times forward price-to-earnings in November. Those gains continued well into January, despite TSMC’s announcement that they were lowering spending amidst expectations of a quarterly revenue drop—the company’s first in four years, according to Bloomberg.
Still, in spite of the Berkshire sale, which would’ve been worth about $3.7 billion based on the average share price over the period of the holding, TSMC’s long-term prospects are still positive. “Many global investors continue adding its shares with its fundamentals improving…and its leadership role in advanced technology,” Tony Huang of Taishin Securities told Bloomberg.
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