By: April Carson
Warren Buffett, a well-known proponent of buy-and-hold investing, recently sold some stock after holding it for a few months. This action suggests that he had a compelling reason for deviating from his usual investment strategy.
Last year, the CEO of Berkshire Hathaway, who is 92 years old, sold most of his $4.1 billion stake in Taiwan Semiconductor Manufacturing Co. (TSMC) in one financial quarter. He did this partly because he was concerned about the risk of war in Taiwan. According to Buffett, he had been monitoring the situation there and decided that it was too risky an investment.
In an interview with Nikkei on Tuesday, he stated that rising geopolitical tensions were a factor in his decision not to invest his firm's capital in the world's largest chipmaker by volume, even though it is well-managed. He believes that there are better places to invest instead.
Recently, China has been showing military aggression by conducting joint force live-fire training exercises with its People's Liberation Army. These exercises are meant to simulate military strikes on Taiwan, which China considers a part of its territory.
Defense experts are worried that the opportunity for Beijing to reunite with Taiwan through peaceful means is decreasing as the older generation of Taiwanese who were born in mainland China passes away. This concern is due to the emergence of a new national identity, especially among the younger generation of pro-independence individuals on the island.
Warren Buffett's recent decision to sell most of his $4 billion investment in chipmaker TSMC has been seen as a move away from China, where the company maintains its production.
It is currently unclear who would prevent China's Xi Jinping from invading if he chooses to do so. In October, Xi Jinping consolidated his power base by removing all contenders from the standing committee of the Politburo, which is the country's leading policy establishment, and securing an unparalleled third term as president in last month's election.
This week, French President Emmanuel Macron made a statement that some critics interpret as an invitation to Beijing to invade Taiwan. Taiwan is the only provider of high-tech microchips in the world. Macron stated that deterring Chinese aggression was not a central strategic interest of Europe. This has caused additional tension in international relations.
Amidst the political uncertainty, Warren Buffett has sold most of his $4 billion investment in chipmaker TSMC. This move was seen as a sign of wariness towards potential future instability in the tech industry and its possible effect on stock prices.
On Wednesday last week, Kevin McCarthy, who is third in line for the presidency and serves as the U.S. House Speaker, hosted the president of Taiwan on American soil. This action may anger Beijing as McCarthy is the highest-ranking U.S. official to host a Taiwanese president since diplomatic ties with China were formed.
If there was an invasion, the US would face severe consequences because they rely heavily on TSMC's silicon logic circuits. This would immensely impact the supply chains, even more than the 2021 semiconductor shortage did.
Warren Buffett's recent decision to sell most of his $4 billion investment in TSMC may be a sign of what's to come. It could very well be an attempt to mitigate risk as tensions in the region continue to build. By selling off his shares, Buffett was essentially removing himself from possible harm if a conflict were to arise.
According to author Chris Miller in his book "Chip War," if TSMC's most advanced chip fabrication facility is hit by a single missile, it could result in delays to the production of phones, data centers, autos, telecom networks, and other technology. These delays could add up to hundreds of billions of dollars of damage to the global economy.
Last week, Terry Gou, the billionaire founder, and ex-CEO of Foxconn announced his intention to run for office in the upcoming Taiwanese elections in January. The current president, Tsai Ing-wen, is not eligible to run for re-election. Gou hopes to avoid war with Taiwan's cross-strait neighbor through his candidacy.
Though Warren Buffett's decision to sell his $4 billion shares in chipmaker TSMC may have been motivated by financial concerns, the implications of a potential national security crisis should not be underestimated. In response to rising tensions between China and Taiwan, investors are likely looking for more stable opportunities in other markets.
Gou, the primary owner of the company that produces Apple iPhones, holds the majority of shares. The company relies on China for about 70% of its revenue. Gou intends to pursue a pro-Beijing and anti-independence stance in his campaign for Taiwan. He urges his fellow Taiwanese citizens to prevent their children from living in a violent environment.
The leaders at the Pentagon are anticipating that if the PLA invades Taiwan, it could lead to a war between the United States and China. This could disrupt the global supply chains which rely on Chinese factories.
In a memo obtained by NBC News in January, U.S. four-star general Mike Minihan wrote that he believes there will be a fight in 2025.
Buffett decided to sell most of his shares in TSMC, as he felt it was too risky to continue holding them. This decision was based on his gut instinct. Buffett’s intuition has proven correct in similar circumstances in the past. He believes that investing in a company that is exposed to potential conflict is unwise, and he was keen to avoid any losses due to the instability of the Taiwan Strait.
The ongoing tensions between China and Taiwan have caused investors like Warren Buffett to be cautious about their investments in TSMC. With the potential for a conflict brewing in the region, Buffett appears to have taken the safe option by selling off his shares. This shows that even experienced investors are not immune to uncertainty and risk, and it is important for all investors to remain mindful of potential threats when making investment decisions.
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April Carson is the daughter of Billy Carson. She received her bachelor's degree in Social Sciences from Jacksonville University, where she was also on the Women's Basketball team. She now has a successful clothing company that specializes in organic baby clothes and other items. Take a look at their most popular fall fashions on bossbabymav.com
To read more of April's blogs, check out her website! She publishes new blogs on a daily basis, including the most helpful mommy advice and baby care tips! Follow on IG @bossbabymav
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