Buffett bets $5 billion on chipmaking with new stake in TSMC

(Bloomberg) — Berkshire Hathaway Inc . of Warren Buffett has acquired a roughly $5 billion stake in Taiwan Semiconductor Manufacturing Co., disclosing its holdings in the world’s leading chip maker as part of its portfolio shakeup last quarter. Stocks soared.

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The Omaha-based conglomerate acquired about 60 million American depositary receipts in TSMC in the three months ending in September, a filing said. The Taiwanese company makes semiconductors for customers such as Nvidia Corp. and Qualcomm Inc. and is the exclusive supplier of custom silicon chips to Apple Inc. Apple remains the single most valuable holding in Berkshire’s portfolio.

Assuming Buffett bought TSMC ADRs at the third-quarter average price, the bet would have cost him $5.1 billion. They are currently trading at $72.80. TSMC shares rose as much as 5.1% in Taiwan after the disclosure.

Buffett, 92, has long shied away from the technology industry, saying he doesn’t want to invest in businesses he doesn’t fully understand. However, this position has changed in recent years, and he has been devoting an increasing portion of his company’s investments to the technology sector.

Chip manufacturing is a segment that promises sustained growth in the coming years as it is essential to the expansion of nascent industries such as autonomous and electric cars, artificial intelligence and connected home applications. The expansion of cloud services such as Amazon.com Inc.’s AWS. also promises to lead to more orders for silicon going into huge data centers.

What Bloomberg Intelligence Says

Tech bond returns in deep red this year may mask the steady cash flows and strengthened balance sheets that underpin the sector. These traits could lead to better performance in 2023 as investors weigh the potential for a recession. Tight spreads and limited downgrades underpin the sector’s strength.

— Robert Schiffman, BI Analyst

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TSMC, which took over from Intel Corp. as the firm advancing at the forefront of chip manufacturing, it has also emerged as a strategically vital player at a time when the US and China have clashed for leadership in the global technology industry. Taiwan’s most valuable company has the manufacturing power to produce the world’s most advanced chips, which are instrumental in advancing each nation’s future commercial industries such as electric cars and artificial intelligence, but also fuel their military and cyber defense ambitions. The US has imposed tougher sanctions on high-end chips made for Chinese customers specifically to prevent them from falling into the hands of the Chinese military.

Biden’s chip restrictions beat Trump by forcing the world to side with China

Shares of TSMC at home in Taiwan had fallen 28% this year by Monday’s close as demand for chips slowed with the economic downturn and investors worried about oversupply. The company said in October that it had cut capital spending to about $36 billion this year, which would still be a record high, down from at least the $40 billion previously planned.

(Updates with Taiwan trade in third paragraph)

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