When Wonderful Investment Principles Meet Market Reality: The Warren Buffett Story That Cost Berkshire $16 Billion

For decades, Warren Buffett’s wonderful approach to investing transformed Berkshire Hathaway into one of the world’s most successful enterprises. His Class A shares delivered a staggering cumulative return of nearly 6,100,000% under his leadership. Yet even the Oracle of Omaha discovered that no investment philosophy is bulletproof. In January 2026, as Buffett handed over the CEO reins to Greg Abel, one particularly costly decision from 2022-2023 stood as a stark reminder: a five-to-nine-month flirtation with Taiwan Semiconductor Manufacturing has evaporated roughly $16 billion in value.

The Foundation: Investment Wisdom That Built an Empire

Throughout his six decades leading Berkshire, Buffett established a collection of unwritten investing principles that became legendary among market participants. These weren’t random rules—they were battle-tested philosophies forged through multiple economic cycles.

First came his unwavering long-term mindset. While others obsessed over quarterly earnings and market volatility, Buffett purchased stakes in companies with the intention of holding them for years or decades. He recognized that although the economy inevitably experiences boom-and-bust cycles, periods of growth vastly outlast downturns. High-quality enterprises positioned in strong industries could compound wealth reliably across long timeframes.

Buffett’s investment quotes and public statements consistently emphasized patience. A second pillar involved ruthless discipline around valuation. He famously “sat on his hands” when stock markets reached historically expensive levels, waiting for genuine dislocations before deploying capital. This wasn’t market timing—it was capital preservation married to opportunism. Getting a wonderful deal on a solid business always trumped paying a cheap price for a mediocre one.

The third element centered on competitive advantages and sustainable moats. Berkshire targeted industry leaders with durable competitive positions—companies whose advantages would persist for decades. Customer trust represented another cornerstone. Buffett understood that trust, once lost, proves extraordinarily difficult to rebuild. The final piece involved strong capital-return programs: companies that returned cash through dividends and buybacks signaled management confidence in long-term prospects.

Together, these principles transformed Berkshire into a market powerhouse, accumulating a $1 trillion valuation by 2024.

The Exception: Taiwan Semiconductor Manufacturing and the Five-Month Detour

During Q3 2022, as bear market conditions created genuine price dislocations, Buffett orchestrated a major position in Taiwan Semiconductor Manufacturing (TSMC). The investment reflected TSMC’s extraordinary strategic position: the company manufactures the vast majority of advanced chips used by Apple, alongside core relationships with Nvidia, Broadcom, Intel, and Advanced Micro Devices. Buffett purchased 60,060,880 shares for approximately $4.12 billion, recognizing TSMC’s critical role in the emerging artificial intelligence revolution.

TSMC’s chip-on-wafer-on-substrate (CoWoS) technology stood at the frontier of AI infrastructure, stacking graphics processing units (GPUs) with high-bandwidth memory for next-generation data centers. By every conventional measure, this appeared to align perfectly with Buffett’s investment philosophy: a market-leading company positioned at the epicenter of transformative technology.

But then something shifted. By Q4 2022, Form 13F filings revealed Berkshire had sold 86% of the position—51,768,156 shares. By Q1 2023, the entire stake had been liquidated. The entire episode lasted between five and nine months.

When addressing Wall Street analysts in May 2023, Buffett offered his rationale: “I don’t like its location, and I’ve reevaluated that.” His comments almost certainly referenced the CHIPS and Science Act, passed in late 2022 under President Joe Biden’s administration. This legislation aimed to incentivize domestic semiconductor manufacturing in the United States. Following its passage, Washington began restricting exports of high-performance AI chips to China. Buffett apparently feared Taiwan might face similar export constraints or geopolitical complications.

Where Timing Failed: The Perfect Storm of Market Conditions

The timing of Buffett’s exit proved catastrophic. Between his TSMC divestment and January 2026, demand for Nvidia’s AI accelerators exploded beyond even bullish projections. TSMC aggressively expanded its CoWoS wafer capacity to satisfy insatiable orders. The company’s growth rate didn’t merely accelerate—it entered a new dimension, and its stock reflected this trajectory dramatically.

In July 2025, Taiwan Semiconductor became only the 13th public company ever to join the trillion-dollar valuation club. Had Berkshire maintained its original stake without selling a single share, that position would have appreciated to approximately $20 billion by late January 2026. Instead, Buffett’s early exit cost his firm close to $16 billion in unrealized gains—and that figure continues expanding as TSMC’s valuation climbs further.

For investors accustomed to Buffett’s extraordinary long-term discipline, the brevity and poor outcome of this investment marked a rare departure. His decision to exit appeared driven by macro-level policy concerns rather than fundamental business deterioration. TSMC’s operations remained robust; its competitive moat remained intact; its customers’ demand continued accelerating. What changed was Buffett’s perception of geopolitical and regulatory risk.

The Deeper Lesson: When Circumstances Override Philosophy

This episode illuminates a subtle but important reality about even the most wonderful investment methodologies: environmental factors can sometimes override fundamental principles. Buffett’s core rules emphasized long-term holding periods and riding through economic cycles. Yet policy uncertainty, supply chain geopolitics, and regulatory reshuffling present unique challenges that even seasoned investors occasionally misjudge.

The irony cuts deeper: Buffett’s original Q3 2022 thesis proved prescient regarding TSMC’s pivotal role in AI infrastructure. The problem wasn’t identifying opportunity—it was maintaining conviction when policy signals appeared ominous. Many investors make similar mistakes on Wednesday afternoons or throughout uncertain quarters, second-guessing fundamentally sound decisions based on short-term environmental noise.

Forward Trajectory: Greg Abel’s Inheritance

Greg Abel, Buffett’s hand-picked successor, inherits a company whose track record remains extraordinary despite this singular miss-step. The TSMC situation offers a valuable data point about the limits of even legendary investors’ decision-making under genuine uncertainty. For Berkshire going forward, Abel is likely to double down on Buffett’s foundational principles: genuine long-term vision, capital discipline, and unwavering focus on business quality rather than macro predictions.

The $16 billion cost of this five-month detour represents less than 2% of Berkshire’s value, and pales in comparison to the company’s cumulative wealth creation. Yet it stands as a humbling reminder that wonderful investment philosophies remain subject to the fog of real-world complexity—and that timing, particularly when driven by policy fears, remains the investor’s eternal vulnerability.