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Warren Buffett Broke One of His Most Important Investing Rules, and It's Cost Berkshire Hathaway $16 Billion (and Counting)

Posted By: keaton
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A rare moment of shortsightedness on the Oracle of Omaha’s part cost Berkshire Hathaway a small fortune.

We’ve officially entered uncharted territory for one of only 12 public companies to have ever reached the $1 trillion market cap plateau. As of Jan. 1, Berkshire Hathaway‘s (BRK.A +0.63%)(BRK.B +0.62%) Warren Buffett has retired from his role as CEO — a post he held for well over a half-century.

During the Oracle of Omaha’s tenure as Berkshire’s overseer of day-to-day operations, he led his company’s Class A shares (BRK.A) to a scorching-hot aggregate return of nearly 6,100,000%. These eye-popping returns are the result of Warren Buffett holding true to his investing principles in every economic climate.

Berkshire Hathaway’s now-former CEO, Warren Buffett. Image source: The Motley Fool.

However, one of the rare times Warren Buffett overlooked one of his guiding investing rules has cost his company dearly — approximately $16 billion (and counting).

Warren Buffett’s unwritten investing rules are the foundation of Berkshire Hathaway’s success

But before diving into the Oracle of Omaha’s rare mistake, it’s imperative to lay the foundation of what made him and his company so successful over the span of six decades. Although lengthy books have been written covering the laundry list of “rules” Warren Buffett followed when investing, we’ll touch on a few of the most important principles.

One of the most crucial aspects of Buffett’s investment approach is his long-term mindset. He approached the idea of buying stakes in other businesses with the goal of holding these positions for years, if not decades to come. He understood that the U.S. economy and stock market would endure boom-and-bust cycles that couldn’t be predicted, but realized that periods of expansion last disproportionately longer than downturns. Therefore, high-quality businesses are ideally positioned to thrive over long periods.

Berkshire Hathaway

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Berkshire’s now-former billionaire boss was also a stickler when it came to value. Getting a good deal for a wonderful business was always more valuable than paying a perceived-to-be low price for a mediocre company. Buffett often sat on his proverbial hands when the stock market was historically pricey, waiting for price dislocations to become apparent before pouncing.

Competitive advantages and sustainable moats represent another trait that was common among Buffett’s investments. He wanted to own stakes in public companies that were leaders in their respective industries. In some instances, these were companies whose advantages were sustainable.

Warren Buffett was always a big believer in corporate trust, as well. In addition to an experienced management team, he favored public companies that instilled trust in their customers. Trust can be lost overnight, but often takes years to build.

The final core puzzle piece of Warren Buffett’s investing philosophy was a robust capital-return program. Buffett strongly gravitated toward businesses that used their capital-return program (dividends and share buybacks) to incentivize long-term investing.

Image source: Getty Images.

The Oracle of Omaha broke a key investing rule, costing Berkshire nearly $16 billion

Clearly, the investing principles Berkshire Hathaway’s former chief relied on worked wonders. However, breaking one of these critical rules has proved exceptionally costly.

During the third quarter of 2022 (i.e., the last quarter Buffett and his team were net buyers of stocks), Buffett oversaw the purchase of 60,060,880 shares of world-leading chip fabricator Taiwan Semiconductor Manufacturing (TSM 0.86%), which is often referred to by its shorthand, “TSMC.”

This sizable $4.12 billion stake in TSMC reflected its unique positioning as a chip foundry. It makes the lion’s share of advanced chips used by Apple and has other core customers that include Nvidia, Broadcom, Intel, and Advanced Micro Devices, among other major semiconductor companies.

Aside from this initial investment taking place during the 2022 bear market, when price dislocations were becoming apparent, TSMC was on the verge of becoming a foundational player in the artificial intelligence (AI) revolution. Taiwan Semiconductor Manufacturing’s chip-on-wafer-on-substrate (CoWoS) technology stacks graphics processing units (GPUs) with high-bandwidth memory in AI-accelerated data centers.

But the Oracle of Omaha’s investment in TSMC would prove to be short-lived. Form 13F filings with the Securities and Exchange Commission show Berkshire Hathaway sold 86% of its stake (51,768,156 shares) in the sequential fourth quarter of 2022, and completely exited the position during the first quarter of 2023. Instead of focusing on the long-term, Warren Buffett’s trade in TSMC lasted in the neighborhood of five to nine months.

Taiwan Semiconductor Manufacturing

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In speaking with Wall Street analysts in May 2023, Buffett proclaimed, “I don’t like its location, and I’ve reevaluated that,” as his reasoning for sending TSMC to the chopping block so quickly. His comments likely reference the passage of the CHIPS and Science Act in 2022 under former President Joe Biden, which aimed to promote domestic semiconductor production. Following the passage of the CHIPS Act, the Biden administration began restricting exports of high-powered AI chips to China. Buffett may have believed similar export challenges or restrictions awaited Taiwan.

Yet Buffett’s timing to exit TSMC, arguably, couldn’t have been worse. Demand for Nvidia’s GPUs has been insatiable, leading to extensive backlogs and TSMC aggressively expanding its monthly CoWoS wafer capacity. In other words, the company’s growth rate dramatically accelerated — and so did the appreciation of its shares. In July 2025, Taiwan Semiconductor became a member of the trillion-dollar club.

If Warren Buffett’s company had held its initial stake in TSMC without selling a share, it would be worth just shy of $20 billion, as of the closing bell on Jan. 26. The Oracle of Omaha’s rare shortsightedness has cost his company close to $16 billion (and counting).

Mistakes of this magnitude are why Berkshire’s new CEO, Greg Abel, is likely to stick to Warren Buffett’s recipe for success and abide by his long list of unwritten investing rules. Having a long-term investing mindset will remain a foundational aspect of Berkshire’s future success.