Buffett Slashes $3.7 Billion of TSMC Stock Holding

Renowned investor Warren Buffett cut his holding in Taiwan Semiconductor Manufacturing Co (TSMC). This comes as an unsettling surprise, as the stock picker disclosed a major stake just months ago. The unpredictable decision put some strain on investor attitudes toward the chip manufacturing company. 

According to the latest reports, Buffett’s Berkshire Hathaway Inc slashed its holding of TSMC’s American depositary receipts by 86%. The stake sale would have amassed up to $3.7 billion if sold at the standard price over the period.

After the startling news broke came the following market chaos. The chip giant’s shares slid as little as 4% in Taipei. In November, TSMC had jumped due to Buffett acquiring a $5 billion stake. It still surpasses an October low by 40%.

The long-term outlook outweighs short-term tensions in investors’ eyes

TSMC has withstood obstacles in the past. Due to Covid and resulting inflation, the company suffered supply disruptions in China and a drop in demand for electronics. Following the Biden administration’s decision to limit China’s access to crucial technologies, TSMC cut its spending target to about $36 billion. 

Owing to the fact that the political relationship between the US and China is strenuous, governments across the world (Washington, Tokyo, Brussels) are urging TSMC to begin manufacturing locally. This could cause a surge in its costs. 

In late 2022, buying TSMC shares seemed like an auspicious decision for value investors. In October, its forward P/E ratio reached 10.3. Before rebounding to roughly 14 times in November, this was the lowest since 2015.

In the middle of a rise in global chip stocks, investors tried to gauge a bottom. Signaling its first quarterly revenue drop in four years, the company had decided to cut down on spending. However, it ended up extending gains just last month. 

Buffett’s decision will presumably taint the stock for a little while. In spite of this, TSMC’s frame of mind remains hopeful, as reported by Taishin Securities’ Huang.