Warren Buffett's $16 Billion Blunder: How a Semiconductor Bet Defied His Own Investment Gospel

The legendary investor’s remarkable six-decade tenure at Berkshire Hathaway was built on iron-clad principles. Yet one significant deviation from his playbook—a hasty exit from Taiwan Semiconductor Manufacturing (TSMC)—has cost his company nearly $16 billion in unrealized gains. It’s a cautionary tale about the risks of abandoning long-term conviction, and a stark reminder that even seasoned investors can stumble when geopolitical concerns cloud their judgment.

The Pillars That Built an Empire

Warren Buffett’s investment philosophy didn’t emerge from theoretical frameworks; it was forged through decades of disciplined execution. His approach rested on several foundational principles that proved remarkably resilient across multiple market cycles.

Patience and permanence defined his strategy. Rather than chasing short-term price movements, Buffett viewed stock purchases as the acquisition of permanent stakes in quality businesses. He understood that while markets fluctuated unpredictably, economic expansions historically outlasted contractions. This long-term perspective allowed him to ride out inevitable downturns and capture decades of compounding growth.

Value discipline was another cornerstone. Buffett didn’t chase expensive assets—he waited for market dislocations that created genuine bargains. Paying a fair price for an exceptional business always trumped overpaying for mediocre ones, no matter how cheap they appeared on the surface.

He also prioritized sustainable competitive advantages. The companies he targeted weren’t just industry leaders; they possessed durable moats that protected them from competition. Whether through brand loyalty, switching costs, or network effects, these advantages ensured long-term profitability.

Finally, Buffett championed capital-efficient management teams that rewarded shareholders through buybacks and dividends rather than frivolous spending. Trust, both in management and customer relationships, wasn’t negotiable.

These principles propelled Berkshire Hathaway’s Class A shares (BRK.A) to a staggering 6,100,000% cumulative return—a testament to consistency over five decades.

The Taiwan Semiconductor Detour: A Rare Misstep

During the third quarter of 2022, Buffett’s team initiated a $4.12 billion position in Taiwan Semiconductor Manufacturing Company, acquiring over 60 million shares. The timing appeared sound: the market was depressed following the bear market, creating the price dislocations Buffett traditionally exploited. TSMC’s positioning as the world’s leading chip foundry—producing the advanced semiconductors for Apple, Nvidia, Broadcom, Intel, and AMD—suggested genuine long-term value.

Moreover, the company sat at the epicenter of the artificial intelligence revolution. Its proprietary chip-on-wafer-on-substrate (CoWoS) technology stacked graphics processing units (GPUs) with high-bandwidth memory, enabling the AI-accelerated data centers powering the generative AI boom. The thesis made sense.

Yet what followed contradicted everything Buffett had preached for 60 years.

By the fourth quarter of 2022, Berkshire had liquidated 86% of the position, completely exiting during the first quarter of 2023. The holding had lasted merely five to nine months—a shocking departure from his buy-and-hold ethos.

When confronted by Wall Street analysts in May 2023, Buffett offered a cryptic explanation: “I don’t like its location, and I’ve reevaluated that.” The comment likely reflected concerns triggered by the CHIPS and Science Act, which Biden’s administration championed to bolster domestic semiconductor manufacturing. Combined with escalating U.S. export restrictions on advanced AI chips to China, Buffett apparently worried that Taiwan—geopolitically vulnerable—might face similar limitations on its technological capabilities.

The Cost of Mistiming

Buffett’s pivot proved disastrously premature. Nvidia’s GPU demand exploded beyond expectations, creating massive backlogs. TSMC responded by aggressively expanding its CoWoS wafer capacity, driving explosive growth. By July 2025, the company achieved a historic milestone: entering the trillion-dollar valuation club.

Had Berkshire maintained its original 60-million-share stake without selling a single share, the position would be worth approximately $20 billion as of late January 2026. Instead, Buffett’s abandonment has forfeited roughly $16 billion in potential appreciation.

This deviation from his core philosophy—substituting geopolitical anxiety for time-tested patience—represents a cautionary lesson: even legendary investors can falter when they ignore their own rulebook. The irony is particularly sharp given that TSMC faced no actual export restrictions, and its dominance in AI chip production only intensified.

Looking Ahead: Returning to First Principles

Greg Abel, Buffett’s successor as CEO, faces an implicit mandate: restore fidelity to the investment principles that built Berkshire Hathaway’s wealth. Long-term conviction, value discipline, and resistance to short-term noise remain as relevant as ever. The Taiwan Semiconductor episode serves as an expensive reminder that staying the course—even when doubt creeps in—separates exceptional investing from merely good investments.

For current and prospective shareholders, the lesson extends beyond one mistake: the enduring power of Buffett’s philosophy lies not in its infallibility, but in its consistency across market cycles. The next phase of Berkshire’s stewardship will test whether Abel can honor that legacy while carving his own path forward.