What happened
Shares of Taiwan Semiconductor Manufacturing (TSM +0.19%) (TSM) were down 2.3%, compared to a 1.2% drop for the S&P 500 index, shortly after the market opened on Thursday.
In a filing with the U.S. Securities and Exchange Commission, Warren Buffett's Berkshire Hathaway revealed that it sold 86% of its stake in the chip stock in the fourth quarter.
The news comes as TSM has significantly outperformed the broader market year to date.
NYSE: TSM
Key Data Points
So what
Over the last year, the semiconductor industry has been reeling from weak consumer PC sales, but TSM was reporting robust growth through the third quarter, partly thanks to healthy demand for advanced 5-nanometer wafers. Even Berkshire Vice Chairman Charlie Munger recently called TSM the strongest chip company, according to reports.
However, in early January, TSM reported that fourth-quarter revenue fell 1.5% sequentially over the third quarter in U.S. dollars.
Although revenue grew 26.7% over the year-ago quarter, management cited demand softness from end-market customers that are struggling with excess inventory.
Now what
It's not clear whether it was Buffett or one of his investing lieutenants who initially started the position in TSM, but it's rare for Berkshire to take a sizable position in a stock only to sell nearly the whole lot in the next quarter.
Perhaps the demand environment is weakening more than the value gurus in Omaha originally thought. In that case, the lack of clarity on TSM's growth trajectory makes it more difficult to accurately assess the company's intrinsic value, which might have led to the sale.
Nonetheless, TSM has a lot going for it, as Munger's comment suggests. Just because Berkshire is selling doesn't mean TSM won't deliver returns to investors. Other investors think the stock is still a good buy.
