How Warren Buffett Abandoned His Own Investment Playbook, Costing Berkshire Hathaway $16 Billion

The principles that made Warren Buffett a legend aren’t just scattered wisdom—they form a cohesive philosophy documented extensively in books by Warren Buffett, interviews, and the investment track record of Berkshire Hathaway. Yet in 2022, the Oracle of Omaha made a decision that contradicted decades of his own teachings, turning what could have been a triumph into one of the most expensive lessons in corporate history.

During the third quarter of 2022, Buffett’s team purchased 60,060,880 shares of Taiwan Semiconductor Manufacturing (TSMC) for $4.12 billion. On paper, it looked brilliant. By January 2026, that same stake would have been worth nearly $20 billion. Instead, Berkshire Hathaway walked away with a loss of approximately $16 billion—a stark reminder that even the greatest investors aren’t immune to breaking their own rules.

The Investment Philosophy That Built a Trillion-Dollar Empire

The strategy that transformed Berkshire Hathaway from a struggling textile manufacturer into a trillion-dollar powerhouse rested on several non-negotiable principles. These weren’t arbitrary preferences—they were the foundation of disciplined wealth creation.

First and foremost was Buffett’s unwavering belief in long-term thinking. Rather than chasing quarterly gains, he bought stakes in quality companies with the intention of holding them for decades. This patient approach allowed him to weather market cycles and benefit from compound growth. He understood that while economic downturns are inevitable, periods of expansion historically dwarf the length of recessions.

Value was his second pillar. Buffett wasn’t interested in paying premium prices for mediocre businesses. He waited—sometimes for years—with “cash on the sidelines” until market dislocations created genuine opportunities. When stocks became irrationally cheap, he struck decisively.

The third principle centered on competitive advantages and sustainable moats. Buffett sought companies that dominated their industries and possessed defensible positions that competitors couldn’t easily replicate. Trust, brand loyalty, network effects—these intangible assets created real economic moats.

Finally, he gravitated toward businesses with robust capital-return programs. Companies that returned cash to shareholders through dividends and buybacks aligned management incentives with long-term investor interests. These principles weren’t invented in isolation; they formed the intellectual backbone of a disciplined investing approach documented across decades of communication with shareholders and industry analysis.

Why TSMC Initially Made Perfect Sense

When Berkshire acquired its TSMC position in Q3 2022, the rationale appeared sound. The market was in a bear phase—precisely the moment Buffett loved to deploy capital. TSMC wasn’t just any semiconductor company; it was the world’s leading chip fabricator, controlling the production of advanced semiconductors for Apple, Nvidia, Broadcom, Intel, and AMD.

More compelling was TSMC’s positioning at the frontier of artificial intelligence. The company’s chip-on-wafer-on-substrate (CoWoS) technology stacked graphics processing units (GPUs) with high-bandwidth memory—the exact components powering AI data centers exploding with demand. TSMC appeared to be sitting at the epicenter of the next technological revolution, with barriers to entry so high that competitors couldn’t easily replicate their capabilities.

The investment seemed to check every box: strong competitive position, emerging industry tailwinds, reasonable valuation in a down market, and exposure to transformative technology.

The Decision That Broke Buffett’s Playbook

But then something shifted. By Q4 2022, just months after the purchase, Berkshire Hathaway had exited 86% of its TSMC stake. By Q1 2023, the position was completely liquidated. The entire investment lasted between five and nine months—a shockingly brief holding period for someone whose investment philosophy emphasized decades-long commitments.

Buffett’s explanation to Wall Street analysts in May 2023 was remarkably direct: “I don’t like its location, and I’ve reevaluated that.” The subtext was clear: geopolitical risk, likely stemming from the CHIPS and Science Act of 2022. The Biden administration had begun restricting advanced AI chip exports to China, and Buffett feared Taiwan might face similar pressures or conflict-driven disruptions to its supply chain.

It was a tactical concern masquerading as strategic thinking. In abandoning his long-term principles in favor of a short-term geopolitical worry, Buffett had violated the very doctrine that made him legendary. He became, briefly, a trader rather than an investor.

The $16 Billion Cost of Broken Discipline

The timing of Berkshire’s exit proved catastrophic. Just as the company was selling, demand for Nvidia’s GPUs became insatiable. TSMC’s CoWoS wafer capacity couldn’t keep pace with orders. The company aggressively expanded production, and its growth rate accelerated dramatically. Stock appreciation followed.

By July 2025, Taiwan Semiconductor became only the 12th public company to join the trillion-dollar market cap club. If Berkshire Hathaway had maintained its original 60-million-share position without selling a single share, today it would be worth approximately $20 billion—a gain of roughly $16 billion from the exit price.

That $16 billion wasn’t lost in the traditional sense; it represents unrealized opportunity. It’s the difference between following Buffett’s own playbook and abandoning it at the worst possible moment. It’s the cost of doubt at the precise instant conviction was most warranted.

What This Means for Berkshire’s Future Under New Leadership

This episode matters not just for its financial implications but for what it signals about institutional investing discipline. Greg Abel, now Berkshire Hathaway’s CEO, inherits both a legacy and a cautionary tale. The company’s future success will depend heavily on whether it returns to the time-tested principles that created the $1 trillion valuation in the first place.

Buffett’s 6,100,000% cumulative return under his stewardship wasn’t luck—it was the compounding result of disciplined adherence to first principles. Long-term thinking, value orientation, competitive advantage assessment, and capital-return alignment remain as relevant today as they were decades ago.

The TSMC exit represents a rare lapse, a moment when even the greatest investor in modern history allowed short-term noise to override long-term conviction. Whether Berkshire Hathaway returns to this foundational philosophy will shape whether its trillion-dollar status represents a ceiling or merely a waypoint in a continuing wealth-creation journey.