In a seemingly sudden and bold move, Warren Buffet of Berkshire Hathaway has announced the divestment of 86% of its TSMC stake in February. Taiwan SemiconductorManufacturing Corporation is the he world’s largest dedicated semiconductor foundry and a major beneficiary of the CHIPS Act. A subsidy galvanizing an oligopoly between the world’s biggest manufacturing and design semiconductor companies in the world. Explained in more detail at the bottom of this article. So why is he selling? He claims it’s because of geopolitical tension. That’s a substantial reason. Not it. He’s going to be putting that money into semiconductor equipment stocks. With the feeding frenzy created by the CHIPS Act and the high exposure suppliers like Applied Materials (AMAT -0.07%) have to the growth of the chip industry, there is huge potential for reasonable earnings multiples.

Charlie Munger raised this point at the recent Daily Journal Corporation annual meeting on February 15. When asked about the semiconductor industry, he replied:

The semiconductor industry is a very peculiar industry. In [the] semiconductor industry, you have to take all the money you’ve made, and with each new generation of chips, you throw in all the money you previously made. So it’s compulsory investment of everything you want to stay in the game. Naturally, I hate a business like that. … [N]ow if you’re now ahead of it, like Taiwan Semiconductor is, that may be a good buy at these prices. It’s not at all clear to me that they’re not going to succeed mightily. … But it’s a difficult business and requir[es] everybody to keep increasing the bets on and on with all the money.

Similar to the Rojos and the Baxters in Fistful of Dollars, smart investors are going to pit these companies against each other while profiting regardless of the outcome. With the federal subsidy and the overall unpredictability of the chip industry, supply-side investing is wise.