How One Departure From Buffett's Core Philosophy Cost Berkshire Hathaway $16 Billion in Unrealized Gains

The story of Warren Buffett’s 60-million-share investment in Taiwan Semiconductor Manufacturing stands as a rare departure from the disciplined principles that built Berkshire Hathaway into a trillion-dollar enterprise. What began in Q3 2022 as a strategic position in the world’s leading chip foundry unraveled within months, ultimately representing one of Buffett’s most consequential missteps in recent decades.

By Q1 2023, Berkshire had completely exited the position. The consequence? If Buffett’s company had maintained even its original stake through mid-2026, that investment would have appreciated to approximately $20 billion—a $16 billion unrealized opportunity cost that continues to grow.

The Investment That Defied Buffett’s Time-Tested Strategy

When Buffett orchestrated the purchase of 60,060,880 TSMC shares for $4.12 billion in late 2022, the conditions seemed theoretically aligned with his principles. The market was in a bear phase, creating pricing dislocations. Taiwan Semiconductor Manufacturing was positioned as a critical supplier in an emerging artificial intelligence revolution, with its chip-on-wafer-on-substrate (CoWoS) technology becoming essential infrastructure for GPU-accelerated data centers.

Yet something fundamental shifted in Buffett’s thinking. Instead of embracing the years-long holding period that had defined his greatest victories, the Oracle of Omaha executed what amounted to a tactical trade. The position lasted roughly five to nine months—a timeframe that contradicted everything his investing philosophy represented.

Understanding Buffett’s Investment Foundation

To appreciate how atypical this TSMC episode was, context matters. Buffett built Berkshire Hathaway’s 6,100,000% cumulative return under his leadership by adhering to several non-negotiable principles.

First came his unwavering long-term orientation. Rather than timing the market or chasing quarterly performance, Buffett purchased stakes in quality businesses with the explicit intention to hold them for decades. He understood that equity markets experience cyclical downturns, but that periods of expansion vastly outpace contractions. High-caliber businesses compound wealth over extended timeframes.

Buffett was equally disciplined about valuation discipline. He preferred acquiring an exceptional business at a reasonable price over a mediocre company at a supposed bargain. This meant sitting idle during bull markets, waiting patiently for dislocations before deploying capital.

Competitive moats mattered intensely. Buffett gravitated toward industry leaders with defensible market positions—companies whose advantages were sustainable and resistant to erosion. Trust represented another cornerstone. He favored businesses that customers relied upon, recognizing that trust takes years to construct but moments to destroy.

Finally, capital returns through dividends and buyback programs attracted his attention. These mechanisms aligned management incentives with long-term value creation rather than short-term stock manipulation.

Why the Taiwan Semiconductor Gamble Turned Sour

The TSMC position began unraveling in Q4 2022 when Berkshire sold 86% of its stake. By Q1 2023, the company had liquidated everything.

Buffett’s explanation proved revealing: “I don’t like its location, and I’ve reevaluated that.” The likely trigger was the CHIPS and Science Act, passed in 2022 under the Biden administration. This legislation aimed to bolster domestic semiconductor production through subsidies and incentives. Simultaneously, Washington implemented restrictions on exporting advanced AI chips to China.

Buffett appeared concerned that Taiwan—as an island with fraught geopolitical relationships—might face export restrictions or operational challenges comparable to those confronting American manufacturers. The location risk seemed to override the foundational business quality.

Yet the timing of this exit proved exquisitely poorly-timed. As 2023 unfolded, demand for Nvidia’s GPUs from artificial intelligence developers became insatiable. TSMC’s CoWoS wafer capacity expanded aggressively to meet that demand. The company transformed into a foundational beneficiary of the AI revolution rather than a peripheral player.

The Growth That Got Away: TSMC’s Ascent After Berkshire’s Exit

By July 2025, Taiwan Semiconductor Manufacturing joined the trillion-dollar market capitalization club—a distinction held by only a dozen or so publicly-traded companies globally.

The mathematical reality crystallizes the opportunity cost. Buffett’s original 60-million-share position, had it remained intact, would have appreciated from $4.12 billion to roughly $20 billion by January 2026—representing a $16 billion unrealized gain.

The irony cuts deeper. TSMC’s ascent vindicated Buffett’s initial logic. The company proved to be exactly what he identified: an industry-leading foundry positioned at the epicenter of the artificial intelligence revolution. Apple, Nvidia, Broadcom, Intel, and Advanced Micro Devices all remained core customers whose GPU and processing demands continued surging.

What changed wasn’t TSMC’s fundamental quality. Rather, Buffett allowed external considerations—specifically geopolitical location anxiety—to override his core principle of long-term holding through market noise.

Lessons for Long-Term Investors

Buffett’s TSMC episode illustrates how even the most disciplined investors occasionally abandon their frameworks under emotional or perceived-urgency pressures. The CHIPS Act and China export restrictions felt like imminent threats requiring immediate action. Yet they proved insufficient to outweigh TSMC’s underlying business momentum.

For Berkshire’s new chief executive Greg Abel, the lesson appears clear: adhering rigorously to Buffett’s time-honored principles remains the surest path forward. Long-term orientation isn’t a suggestion—it’s the mechanism through which exceptional wealth accumulates.

The $16 billion opportunity cost serves as an expensive reminder that even legendary investors occasionally stumble when they compromise their foundational philosophy. Yet this very stumble reinforces why discipline matters. Markets reward patience; they punish panic-driven exits masquerading as prudent risk management.