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Shares of the Taiwan Semiconductor Manufacturing Company (TSMC) were up in the aftermarket after SEC filings by Berkshire Hathaway revealed that the investment firm had bought a massive stake in the Taiwanese chip manufacturer. The firm, known for its cautious investment approach and mostly disregarding technology stocks, scooped up a little over 60 million shares of the chipmaker, at a time when the semiconductor industry is facing a broader downturn and share prices of both manufacturers and sellers have lost large chunks of their value as a hawkish stance and macroeconomic uncertainty drives investors to safer assets and away from the riskier stocks.
TSMC's Shares Reverse Months Of Losses After Warren Buffet Buys 60 Million Shares
TSMC has become one of the most crucial countries in the world of late, as it is responsible for supplying some of the largest companies in the world with semiconductors. Its largest customer is Apple, whose reliance on the firm has only increased with time particularly after Apple launches its own processor lineup for notebooks. However, even before that, the company relied exclusively on TSMC to manufacture its chips, shifting from a dual sourcing strategy that it had followed earlier which saw it procure some of its chips from Samsung as well.
Apple is Berkshire Hathaway's largest investment, and its latest SEC filing shows that the firm owns an absolutely mind blowing $123 billion stake in the technology firm. The latest technology addition to the portfolio was TSMC however, in which Warren Buffett's legendary investment firm now holds another massive $4.1 billion stake. TSMC's current market capitalization sits at $359 billion, and its shares jumped by close to 6% in aftermarket trading after Berkshire Hathaway filed its latest 13-F report with the Securities and Exchange Commission (SEC) at the close of the market yesterday.
The shares closed at $77 in aftermarket trading, reversing nearly two months of losses on the stock market. These American depository receipts (ADR) had opened at $133 in January this year and then gone ahead to peak at a little less than $141, at a time when the Russian invasion of Ukraine had not kicked off and the Federal Reserve had not taken an all out approach to combat inflation.
However, 2022 was not a good year for TSMC since the ADRs then bottomed out at $59.43 during the second half of this year, as they shredded more than half of their value at the start of this year. These troubling times for the chipmaker seemed to be the perfect opportunity to buy shares, at least for Berkshire, whose latest portfolio is worth $296 billion.
Turbulence in the economy has also affected TSMC, and the fab has been forced to reduce its capital spending for this year's latest quarter as an order slowdown and late delivery of equipment leaves it with a reduced need to manufacture chips. The slowdown comes after the fab was forced to pull out all stops for meeting the demand of the automotive industry had faced a mismatch between its orders and the market demand for cars after it cut back orders in the aftermath of the coronavirus pandemic.
TSMC is one of the handfuls of companies in the world that is capable of manufacturing chips with advanced 3-nanometer chip fabrication technology. The firm started 3nm production this year, and it is also building a factory in the U.S. to bring chip manufacturing closer to North America.