Shares of the world’s largest chip foundry fell as much as 4% in Taipei on the news, amid wide losses in the market. youSMC jumped in November amid news that Buffett had acquired a stake worth around $5 billion, and it’s still more than 40% from the October low.
“It is surprising that Berkshire reduced its stake by just a quarter, which is in contrast to its previous practice of investing long-term and continuing to add shares,” said Tony Huang, vice president of Taishin Securities Investment Advisory Co.
The chip industry had to contend with Covid-induced supply disruptions in China and a drop in demand for electronics amid rising inflation. TSMC cut its spending target by about 10% in 2022 to around $36 billion after the Biden administration placed new restrictions on China’s access to critical technologies.
The economics of the industry are also changing. Amid political tensions between the United States and China, the governments in Washington, Tokyo and Brussels are pressing TSMC to help develop local production capabilities. This threatens to increase your costs.
Late last year seemed like a good time to buy TSMC shares as a value investor. Its forward price-earnings ratio rose 10.3-fold in October, the lowest level since 2015, before rebounding nearly 14-fold in November, according to data compiled by Bloomberg.
Shares of the Taiwanese chipmaker had risen amid rising global chip stocks as investors tried to gauge a bottom. It extended earnings last month even after it announced plans to cut spending further and signaled its first quarterly revenue drop in four years.
“While stocks are likely to suffer in the short term from the news of the Buffett sale, the long-term outlook for TSMC remains positive.”, according to Huang of Taishin Securities.
“Many global investors continue to add their stocks with their improving fundamentals, including better utilization rates and their leading role in advanced technology,” Huang added.
Source: Ambito
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