In a CNBC interview early Wednesday morning, when Warren Buffet was asked why he sold almost his entire stake in Taiwan Semiconductor ($TSM), Buffet first responded with, "There’s a danger of seismic action where they're located” before giving a more cryptic response stating “I'd rather have a US domiciled company, rather than be subject to who knows what depending on conditions outside their control” suggesting that ongoing geopolitical risks related to Taiwan pose a threat to Taiwan Semiconductor.
Having followed Buffet for many years, I thought every part of this response was abnormal. The idea that The Oracle of Omaha sold approximately $3.8 billion of TSM stock because of a potential earthquake seems ambitious, to say the least. The second part of the response implying that he's selling the company due to heightened geopolitical risks is also very unlike Buffet, who prides himself on investing in “great companies” and makes a point to not speculate on factors outside his control. Despite Buffet's unusual response, it likely wasn't enough to be a definite cause for concern regarding Taiwan and heightened geopolitical risks.
However, that was until just later the same day when Senator Tuberville disclosed his trades for March and revealed that he had purchased $75 strike price, $TSM put contracts, expiring 9/15/23.
This could be cause for concern for two primary reasons, with the first being that it's very rare to see lawmakers buying put contracts due to the nature of them being that they’re betting on a company to fall in market value.
The second reason is that Senator Tuberville sits on The Senate Committee for Armed Services and the Seapower and Strategic Forces subcommittee. As a result, Tuberville has access to classified military and defense information out of reach to the public. Given the heightened geopolitical tension around Taiwan in recent weeks, along with his purchase of TSM put contracts, the data suggests that Taiwan might be in the cross hairs of a potential war sooner rather than later.
While an outbreak of a war between China and the US over the island would have far-reaching consequences, Taiwan Semiconductors arguably has the most to lose of any company. Especially when you consider that the US has already singled out that in the event of a Chinese invasion of Taiwan, the US would “Blow up” the TSM Semiconductor facilities and move the engineers to Arizona rather than let China access the technology.
Given the unusual nature of Buffet and Tuberville’s trades, it makes you wonder whether they know something about Taiwan that we don’t?