Warren Buffett's $16 Billion Misstep: When Investing Rules Get Broken

The investing legend Warren Buffett has built his legendary career on a set of unwritten principles that proved remarkably resilient across decades of market cycles. Yet one notable deviation from these core rules has become an expensive lesson—and a rare misstep that cost Berkshire Hathaway approximately $16 billion in unrealized gains as of early 2026.

During his tenure leading Berkshire Hathaway, Buffett orchestrated nearly a 6,100,000% cumulative return on the company’s Class A shares. That extraordinary wealth creation didn’t happen by accident. It was the result of disciplined adherence to a philosophy centered on long-term thinking, competitive advantages, and patience. However, the Oracle of Omaha’s brief flirtation with Taiwan Semiconductor Manufacturing (TSMC) stands as a stark reminder that even the best investors aren’t immune to momentary lapses in judgment.

The Principles That Built Berkshire’s Fortune

Warren Buffett’s investment approach rested on several foundational pillars. The most critical was his unwavering long-term mindset. Rather than chasing short-term market movements, Buffett acquired stakes in quality businesses with the intention of holding them for years or even decades. He understood that while the stock market experienced boom-and-bust cycles, periods of expansion historically lasted far longer than downturns, making patience a competitive advantage.

Another cornerstone of his philosophy involved being ruthlessly selective about valuation. Buffett preferred to acquire wonderful businesses at fair prices rather than mediocre companies at cheap valuations. When stock markets reached elevated levels, he displayed remarkable discipline by sitting on the sidelines, waiting for price dislocations to create genuine opportunities.

Buffett also gravitated toward companies with sustainable competitive advantages—what he called “economic moats.” These were industry leaders whose market positions proved difficult for competitors to challenge. Additionally, he favored businesses with trustworthy management and strong customer relationships. And crucially, he rewarded companies that deployed capital intelligently through dividends and share buybacks, incentivizing long-term ownership.

These principles—combined with Berkshire’s operational discipline under management—created the conditions for generational wealth accumulation.

A Brief Dance with Taiwan Semiconductor: From $4.1 Billion to Exit

The narrative shifted dramatically in the third quarter of 2022. That’s when Warren Buffett and his investment team purchased over 60 million shares of TSMC, establishing a $4.12 billion position. The timing seemed purposeful. The 2022 bear market had created genuine price dislocations, and TSMC’s role in the emerging artificial intelligence revolution appeared undeniable.

Taiwan Semiconductor Manufacturing dominated the landscape of advanced chip production. As the world’s leading chip foundry, TSMC manufactured the vast majority of cutting-edge processors used by Apple, Nvidia, Broadcom, Intel, and Advanced Micro Devices. The company’s proprietary chip-on-wafer-on-substrate (CoWoS) technology stacked graphics processing units with high-bandwidth memory—precisely what AI data centers demanded for accelerated computing.

On the surface, the investment seemed to align with Buffett’s playbook: a market leader in an industry experiencing tailwinds, acquired during market turmoil at attractive valuations.

But the position would prove short-lived.

SEC filings reveal that Berkshire Hathaway sold 86% of its TSMC stake during the fourth quarter of 2022, exiting the remainder entirely by the first quarter of 2023. The entire holding period lasted roughly five to nine months—a striking departure from Buffett’s historical practice of multi-year or multi-decade commitments.

When speaking with Wall Street analysts in May 2023, Buffett offered his reasoning: “I don’t like its location, and I’ve reevaluated that.” His comments almost certainly referenced the CHIPS and Science Act, enacted in 2022 under the Biden administration to boost domestic semiconductor manufacturing. Following that legislation, U.S. officials began restricting exports of high-performance AI chips to China, creating uncertainty about Taiwan’s geopolitical positioning and future export capabilities.

Buffett’s concern wasn’t unreasonable on its surface. Taiwan’s vulnerability to Chinese pressure and U.S. export restrictions could theoretically constrain TSMC’s growth trajectory. Yet his exit timing proved catastrophically premature.

The $16 Billion Question: What Buffett’s Error Teaches Investors

After Berkshire’s departure, demand for TSMC’s chips—particularly for Nvidia’s GPUs—became insatiable. The company aggressively expanded its manufacturing capacity, and its CoWoS wafer production surged. In July 2025, TSMC officially joined the trillion-dollar market capitalization club, a milestone that underscored the company’s resilience and the durability of AI demand.

Had Berkshire Hathaway maintained its original position without selling a single share, that $4.12 billion investment would be worth approximately $20 billion as of January 26, 2026. Instead, the decision to exit cost the company—and its shareholders—roughly $16 billion in foregone appreciation.

The irony is sharp: Buffett violated one of his most sacred principles by trading TSMC like a speculative short-term vehicle rather than treating it as a long-term ownership stake. His geopolitical concerns, while not baseless, failed to account for TSMC’s fundamental competitive position and the seemingly insatiable appetite for semiconductor capacity in the AI era.

This episode carries lessons that extend far beyond Berkshire Hathaway. It demonstrates that even legendary investors occasionally succumb to tactical thinking rather than strategic clarity. Second-guessing quality businesses based on macro uncertainty—rather than fundamental deterioration—can prove far more expensive than the risk it attempts to avoid. Buffett’s successor at Berkshire, Greg Abel, will likely hold this misstep close, reinforcing the importance of adhering to time-tested principles even when circumstantial doubts emerge.

For Warren Buffett’s news and investing record, this moment stands as a reminder that consistency in philosophy matters far more than being right on every individual decision. The question now is whether future opportunities will offer a chance for redemption.