Taiwan Semiconductor soars 14% after Warren Buffett's Berkshire Hathaway buys $4 billion stake

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  • Taiwan Semiconductor soared 14% on Tuesday after Warren Buffett’s Berkshire Hathaway revealed a stake.

  • The Omaha-based conglomerate purchased a $4 billion stake in the company last quarter.

  • The purchase comes amid heightened concerns that China might invade Taiwan.

Taiwan Semiconductor stock surged as much as 14% on Tuesday after Warren Buffett’s Berkshire Hathaway revealed a stake in the company.

According to its third-quarter 13-f filing, Berkshire Hathaway acquired a 60 million share stake in Taiwan Semiconductor, worth nearly $5 billion when accounting for Tuesday’s surge higher. The stake was worth closer to $4.3 billion on Monday.

The position was held by Berkshire Hathaway as of September 30, and there is no indication of whether Warren Buffett initiated the stake or if one of his portfolio managers did. Taiwan Semiconductor makes up just 1.4% of Berkshire Hathaway’s $296 billion portfolio.

Taiwan Semiconductor designs and manufactures chips for mobile and computer-based products sold by everyone from Apple, Nvidia, and Qualcomm, among others. In fact, Taiwan Semiconductor counts Apple as its largest customer, making up nearly 27% of its revenue, according to estimates from Bloomberg.

That means Berkshire Hathaway is gaining some indirect exposure to the success of Apple’s iPhone, complementing its direct investment in Apple, which was a $124 billion stake making up more than 40% of its portfolio as of September 30.

The surprise purchase from Berkshire Hathaway also signals that they may not be as concerned as some investors are about the growing risk of China invading Taiwan. Such a move would likely cause a geopolitical storm that threatens the livelihoods of technology-based companies that are so important to today’s economy.

Likely aiding Berkshire Hathaway’s conviction in its new Taiwan Semiconductor position is it cheap valuation, as the stock trades at a forward price-to-earnings ratio of 12.5 times, well below its peer group’s average valuation of 16.5x, and below S&P 500’s forward P/E multiple of 17.1x.

Berkshire Hathaway’s purchase of Taiwan Semiconductor helped push the broader segment higher on Tuesday, with the VanEck Semiconductor ETF jumping more than 4%.

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