The $16 Billion Reckoning: How Warren Buffett's TSMC Miscalculation Defied His Own Investment Doctrine

Warren Buffett built Berkshire Hathaway into a trillion-dollar powerhouse by adhering to principles that seemed almost monastic in their discipline: buy quality businesses for the long haul, wait patiently for pricing anomalies, and never compromise on competitive advantages. Yet in late 2022, the Oracle of Omaha made a decision that would shatter one of his most sacred rules, ultimately costing his company roughly $16 billion in unrealized gains—a sobering reminder that even legendary investors are not immune to tactical missteps.

The timeline itself reads like a cautionary tale. In the third quarter of 2022, as markets tumbled and valuations became attractive, Buffett authorized the purchase of 60 million shares of Taiwan Semiconductor Manufacturing at a $4.12 billion valuation. The investment made intuitive sense at the moment: TSMC was the world’s leading chip fabricator, supplied critical components to Apple, Nvidia, Broadcom, and Intel, and stood poised to dominate the artificial intelligence revolution through its advanced CoWoS technology. Yet by the fourth quarter of 2022, Buffett had already begun liquidating. By Q1 2023, the position was completely closed. A holding period measured in months rather than years.

Why Warren Buffett’s Core Investing Principles Mattered So Much

Understanding Buffett’s costly departure requires first grasping what made his approach to capital allocation so effective for over six decades. His playbook wasn’t complicated—it was methodical.

Long-term orientation formed the bedrock. Buffett believed the U.S. economy moved in cycles that couldn’t be predicted on a quarterly or annual basis. Recessions arrived and passed. Bull markets extended far longer than bear markets. This asymmetry meant that exceptional businesses, given time, would compound shareholder value in ways that timing the market could never achieve. He didn’t buy stocks; he bought fractional ownership in operating enterprises.

Value discipline ran parallel to this time horizon. Buffett was famous for sitting on his hands when asset prices seemed detached from reality. The phrase “a wonderful business at a fair price beats a mediocre business at a cheap price” encapsulated his philosophy. He preferred owning leading companies with durable competitive moats—businesses that were genuinely difficult for competitors to disrupt.

The final pillar was trust in management and sustainable advantage. Buffett gravitated toward companies whose customer loyalty and market position were reinforced year after year. These weren’t flash-in-the-pan market darlings. They were franchises.

The Geopolitical Tremor That Shook Buffett’s Conviction

What happened in 2022 to make Buffett abandon his own rulebook? The answer points to a strategic miscalculation regarding geopolitical risk.

The Biden administration’s passage of the CHIPS and Science Act aimed to reshore semiconductor manufacturing to the United States. Buffett, in a May 2023 investor call, explained his reasoning succinctly: “I don’t like its location.” This comment reflected anxiety about potential export restrictions on advanced chip technology to China—restrictions that would starve TSMC of a critical revenue stream.

The logic wasn’t unreasonable. If U.S. policy pivoted toward semiconductor nationalism, Taiwan-based production could indeed face regulatory headwinds. Buffett made a tactical judgment call. Hold Taiwan exposure, or exit and preserve dry powder?

He chose exit. And then, almost immediately, the premise underlying his exit proved flawed.

The Timing That Will Haunt Warren Buffett’s Legacy

What followed was not a gentle decline but a surge. Demand for Nvidia’s GPUs became insatiable. Data center operators worldwide scrambled for chips. TSMC’s monthly CoWoS wafer capacity expanded aggressively to meet demand. The company’s growth rate didn’t merely hold steady—it accelerated.

In July 2025, Taiwan Semiconductor crossed into the trillion-dollar market capitalization club. Had Berkshire retained its original stake without selling a single share, that position would be worth approximately $20 billion as of late January 2026. Instead, Buffett’s company exited near the trough of the semiconductor cycle, just as the AI revolution began driving exponential demand for TSMC’s most advanced production capabilities.

The mathematics are unforgiving. From exit to the present, unrealized gains on the forgone position total roughly $16 billion and continue climbing as TSMC’s valuation rises alongside AI momentum.

A Rare Departure From Warren Buffett’s Time-Tested Formula

What makes this episode especially instructive is its rarity. Over 50+ years, Buffett’s long-term, conviction-based approach generated compound annual returns that dwarfed passive index investing. His willingness to ignore short-term noise and geopolitical anxiety proved to be among his greatest assets. Yet on Taiwan Semiconductor, the inverse happened: he allowed macro concern to override micro fundamentals.

TSMC wasn’t a speculative position. It was exactly the type of business Buffett claimed to prefer—a capital-intensive monopoly in a critical industry, with technological moats and growing demand. The company’s location, while a legitimate policy risk, didn’t change its role as the indispensable supplier for the AI buildout consuming global tech spending.

This wasn’t a value trap or a deteriorating business. This was a multi-year secular trend that Buffett, of all investors, should have recognized and held through volatility.

What Berkshire’s New Leadership Learned From This Misstep

The transition from Buffett to Greg Abel as CEO likely means a recalibration toward stricter adherence to the principles that Buffett occasionally violated. Abel has signaled that Berkshire will continue prioritizing long-term business ownership, competitive advantage, and price discipline—the very rules that Buffett temporarily abandoned.

The TSMC episode serves as an oblique endorsement of those principles. By straying from them, even briefly and for what seemed like rational geopolitical reasons, Buffett forgoed what would become one of the decade’s most lucrative technology positions. For investors trying to emulate Buffett’s approach, the lesson is paradoxical: the founder’s own occasional failures validate why his rules exist.

Staying the course isn’t always comfortable. But as this $16 billion missed opportunity demonstrates, the alternatives can be far more costly.