The Critical Importance of Long-Term Vision: How Warren Buffett's TSMC Trade Exposed an $16 Billion Oversight

When Warren Buffett stepped down as CEO of Berkshire Hathaway after more than five decades of leadership, his legacy appeared nearly untouchable—a staggering 6,100,000% cumulative return on Class A shares under his watch. Yet this remarkable track record carries a profound lesson embedded in a single investment decision that has taken on fresh significance in today’s artificial intelligence-driven market environment.

During the third quarter of 2022, Buffett’s team accumulated 60,060,880 shares of Taiwan Semiconductor Manufacturing (TSMC), building a $4.12 billion position in the world’s leading chip fabricator. On paper, the move seemed strategically sound: TSMC supplies critical processors to Apple, Nvidia, Broadcom, Intel, and Advanced Micro Devices, positioning it as a foundational player in semiconductors. Yet what followed revealed how even legendary investors can overlook the fundamental principles that built their empires.

Why Long-Term Investing Principles Matter in the AI Revolution

The foundation of Buffett’s five-decade reign rested on clearly defined investing tenets that proved remarkably durable across market cycles. His philosophy centered on three core pillars: maintaining an unwavering long-term perspective, identifying businesses with sustainable competitive advantages, and exercising patience during market dislocations.

In practice, this meant Buffett typically held stakes in exceptional companies for years or decades, confident that economic expansions outlast contractions. He insisted on purchasing quality businesses at reasonable prices rather than mediocre enterprises at bargain valuations. When valuations appeared stretched, Buffett showed discipline by waiting for more attractive entry points. He also prioritized companies with enduring competitive moats—those with durable advantages their rivals couldn’t easily replicate. Critically important too was his focus on corporations with prudent capital allocation strategies through dividends and share buybacks.

These weren’t written rules but rather an unshakeable investment framework that rewarded patience and conviction. Their significance became unmistakable across every market environment Berkshire navigated.

The TSMC Decision: A Significant Departure from Buffett’s Proven Strategy

TSMC’s positioning as a crucial infrastructure provider for the AI revolution made the initial investment logical. The company’s chip-on-wafer-on-substrate (CoWoS) technology represented a pivotal advantage—stacking graphics processing units with high-bandwidth memory for AI-accelerated data centers. Demand for these specialized chips was beginning to surge as companies raced to build artificial intelligence capabilities.

However, Buffett’s commitment to TSMC proved strikingly brief. Form 13F filings reveal that by the fourth quarter of 2022—mere months after acquiring the stake—Berkshire had sold 86% of the position. By the first quarter of 2023, the position had been completely liquidated. The entire investment cycle lasted between five and nine months, a timeframe that fundamentally contradicted Buffett’s historical approach.

His public explanation was revealing. Speaking with Wall Street analysts in May 2023, Buffett stated, “I don’t like its location, and I’ve reevaluated that.” His hesitation apparently stemmed from the CHIPS and Science Act, passed in 2022, which aimed to bolster domestic semiconductor production and subsequently triggered export restrictions on advanced AI chips to China. Buffett may have anticipated additional geopolitical constraints on Taiwan’s semiconductor exports.

Yet his timing proved calamitous. TSMC’s growth trajectory accelerated dramatically as Nvidia’s GPU demand proved insatiable, forcing the company to aggressively expand its monthly CoWoS wafer capacity. In July 2025, TSMC joined the exclusive trillion-dollar market capitalization club. Had Berkshire maintained its original position without selling a single share, today’s holding would be worth approximately $20 billion—representing a critical $16 billion opportunity cost.

The Pivotal Importance of Timing and Conviction in Investment Strategy

This $16 billion difference carries implications that extend well beyond Berkshire’s bottom line. It illuminates why Buffett’s original principles—often dismissed as outdated or inflexible—retained profound strategic value precisely when market conditions grew most uncertain.

The TSMC misstep demonstrates that even superior fundamental analysis can falter when conviction wavers. Buffett correctly identified a cornerstone business positioned at the frontier of technological transformation. He made his purchase at a compelling valuation during a market downturn. Yet he abandoned the thesis based on short-term geopolitical concerns rather than letting the fundamental thesis play out across a longer timeframe.

The stakes of this decision reveal something essential about investment success in today’s rapidly evolving landscape: the most critical factor often isn’t identifying exceptional opportunities—it’s maintaining the discipline and patience to realize their full potential. Those who exit prematurely rarely recoup what they’ve forfeited.

Greg Abel, Berkshire’s new leadership, inherits an organization whose future prosperity will likely depend on returning to precisely those principles that generated six million percent returns. Whether regarding semiconductors, artificial intelligence, or emerging technologies yet to be discovered, the enduring importance of long-term conviction in high-quality businesses cannot be overstated.