After its filings with the Securities and Exchange Commission (SEC) revealed that Warren Buffett’s Berkshire Hathaway had sold billions of dollars of TSMC’s share’s within months of buying them, former vice president Al Gore’s investment firm Generation Investment Management has followed suit. The firm’s filings from last week show that it has also sold its TSMC stake, but unlike Buffett, who chose to keep some shares, Generation Investment has exited its position entirely. Before its SEC filings, the firm also posted its quarterly investor letter, which, while not mentioning the reasons behind the disposal, did raise concerns about geopolitical tensions in the Taiwan strait and the vulnerability of the semiconductor supply chain.
Chip Disruption Will Have “Profound” Consequences For America, Says Al Gore’s Firm
OVer the course of the past few years, and especially as its partnership with Apple grew, TSMC has established itself as one of the most important technology companies in the world. It is the largest contract chip manufacturer on the planet, responsible for supplying heavyweights such as Apple, AMD, QUALCOMM and NVIDIA with crucial chip products. TSMC is also leading the industry in terms of technology, with its 3-nanometer chipmaking process one of the most advanced that is currently in mass production.
However, a slow start to 2023 as the chip industry is digesting inventories build up after excessive orders in 2022 and reduced demand has painted a cloudy picture for TSMC and other semiconductor companies. This is further complicated by the firm’s precarious location, as all its advanced facilities are based in Taiwan.
In this backdrop, Al Gore’s Generation Investment Mmanagement sold its $22 million TSMC stake during the fourth quarter of 2022. The investment firm has been a long time ivnestor of TSMC, with its filings dating as far back as 2016 showing an investment in the chipmaker. The $22 million was as of the third quarter of 2022, when Generation Investment had owned more than 300,000 TSMC American depository receipts.
TSMC’s shares have returned more than 150% over the past five years.
Looking at TSMC’s returns over the past five years, it’s likely that Generation Investment simply decided that it was time to exit the stock and rebalance the portfolio, especially as most chip industry analysts worry that a bottom is due for the first half of this year due to macroeconomic conditions and an industry slowdown.
In an investor letter published in January, the firm’s co-chief investment officers shared their current take on the semiconductor industry as they warned that America remains vulnerable to geopolitical uncertainty in the Taiwan Strait.
They explained that:
Semiconductors are the canary in the coalmine. America depends heavily on East Asia, especially Taiwan, for supplies. To say that disruption to the global supply chain for semiconductors would have ‘profound consequences’ is an understatement. Markets and countries would be roiled. Depending on who you ask, you should either be worried or very worried about the future of Taiwan. Xi Jinping is clear about his long-term goals for the island.
The letter also praised TSMC as it outlined that the fab is “driving forward leading-edge semiconductor technology” and cautioned that “we do not seek to base investment decisions on our reading of macro or geopolitics.”
Generation Investment has also previously praised TSMC, with its invesor letter for Q2 2022 outlining that it is an exception to the firm’s strategy of “staying clear” of high capital expenditure businesses.
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