Taiwan Semiconductor Stock Forecast: TSM slides on shocking Warren Buffet reversal

• Warren Buffet's Berkshire Hathaway sold most of its shares in Q4.
• TSM stock is down 6% in Wednesday's premarket on the news.
• Taiwan Semiconductor stock rose 50% since Buffet's position was made known last November.
• Nvidia and AMD stocks are also selling off Wednesday.

Taiwan Semiconductor's (TSM) stock price drooped 6% to $92 in Wednesday's premarket after disciples of Warren Buffet were spooked by the Oracle of Omaha's sudden scrapping of his position. A 13F filing with the Securities & Exchange Commission (SEC) shows that Buffet's Berkshire Hathaway sold off about 86% of his $5 billion position during the fourth quarter.

Taiwan Semiconductor stock news: What does the Oracle see?

What does Warren Buffet see that the rest of the market does not? For one, Berkshire Hathaway could just be taking profits, but that is somewhat unusual for the holding company's typical buy-and-hold mentality.

“It’s surprising that Berkshire cut its holding so much in just a quarter, which differs from its past practice of long-term investment and continuing to add shares,” said Tony Huang, vice president at Taishin Securities Investment Advisory, in an interview with Bloomberg.

TSM shares – trading in the low-$60s when Warren Buffet's investment was announced last November – did advance about 50% in value since the investment, so maybe Buffet just seized on a decent swing trade. However, more than half of that 50% came amid January's rally, so Berkshire would not have benefited.

The better theory is that Berkshire was just trimming ahead of expectations that 2023 would see another major downturn in equities. As evidence for this position, Berkshire's 13F also shows a 91% trimming of its investment in US Bancorp (USB), a position that it has held for years. Other stocks that were sold include Chevron (CVX), Bank of New York Mellon (BK), McKesson (MCK), Activision Blizzard (ATVI), Ally Financial (ALLY) and Kroger (KR).

TSM's sell-off has also affected major semiconductor customers like Nvidia (NVDA), down 1%, and Advanced Micro Devices (AMD), down 0.6% in Wednesday's premarket. NASDAQ futures are also down 0.7% at the same time.

On Tuesday, Taiwan Semiconductor disclosed that it will raise its investment in Arizona by at least $3.5 billion. The first announcement last year stated that Taiwan Semi would invest $12 billion in a new advanced chip fab there, but later in the year the company tripled that figure to $40 billion. Its first facility is scheduled to begin operations in 2024, and the second fab is forecast to go online in 2026.

Taiwan Semiconductor stock forecast

Luckily, Taiwan Semiconductor stock has support nearby at $91. This level stems from August of 2022 as well as periods before then. If TSM stock breaks below $91, then the $83 resistance level from November of last year may also become a savior of sorts. Any drop below there and it is back to the $73-$74 support zone from the end of December. Interestingly enough, the Moving Average Convergence Divergence (MACD) already anticipated this downturn when it crossed over bearishly on February 3.

TSM daily chart