To The Moon

Bloomberg) -- Warren Buffett’s Berkshire Hathaway Inc. took a stake of about $5 billion in Taiwan Semiconductor Manufacturing Co., a sign the legendary investor thinks the world’s leading chipmaker has bottomed out after a selloff of more than $250 billion. Shares surged.

The Omaha-based conglomerate acquired about 60 million American depository receipts in TSMC in the three months ended September, it said in a filing. The Taiwanese company produces semiconductors for clients like Nvidia Corp. and Qualcomm Inc. and is the exclusive supplier of Apple Inc.’s custom Silicon chips. Apple remains the most valuable single holding in Berkshire’s portfolio.

Assuming Buffett bought TSMC’s ADRs at the average price for the third quarter, the stake would have cost him $5.1 billion. They currently trade at $72.80. TSMC’s shares rose as much as 9.4% in Taiwan after the disclosure, the largest intraday increase in more than two years.

The 92-year-old Buffett long shied away from the tech industry, making the case that he didn’t want to invest in businesses that he didn’t fully understand. That stance changed in recent years, however, and he has dedicated an increasing proportion of his company’s investments to the tech sector.

Chipmaking is one segment that promises sustained growth over the coming years as it’s essential to the expansion of nascent industries like self-driving and electric cars, artificial intelligence and connected home applications. Expansion of cloud services like Amazon.com Inc.’s AWS also promises to bring in more orders for silicon that goes into vast data centers.

What Bloomberg Intelligence Says

Technology’s deep-red bond returns this year may mask the robust cash flows and fortified balance sheets that underlie the sector. These traits could lead to outperformance in 2023 as investors weigh the potential for a recession. Tight spreads and limited rating downside underpin the sector’s strength.-- Robert Schiffman, BI analyst

TSMC, which has taken over from Intel Corp. as the firm advancing the cutting edge of chipmaking, has also emerged as a strategically vital player. TSMC has the manufacturing prowess to make the world’s most advanced chips, instrumental to advancing every nation’s future commercial industries like EVs and AI.

TSMC shares at home in Taiwan had dropped 28% this year through Monday’s close, as demand for chips has slowed with the economic downturn and investors fretting about oversupply. The company said in October it pulled back on capital spending to about $36 billion this year, which would still be a record high, down from at least $40 billion planned previously.

source：Bloomberg