Dan Loeb's hedge fund has been quietly backing away from Taiwan Semiconductor Manufacturing Company (TSM). The activist investor's Third Point LLC cut its stake by 23% during the third quarter of 2025, continuing a steady retreat that's now stretched across multiple quarters.

According to Third Point's latest 13F filing, which captures holdings as of September 30, 2025, the fund now owns 1.10 million shares of the chipmaking giant. That's down from 1.43 million shares in Q2 2025 and 1.78 million shares back in Q1. The pattern is unmistakable: Loeb has been trimming this position for a while now.

The Political Storm Brewing

The timing makes sense when you consider what's happening geopolitically. The Trump administration recently took a hardline stance on Chinese semiconductors, though it pushed actual tariff implementation out to 2027. The U.S. Trade Representative didn't mince words, stating that "China's targeting of the semiconductor industry for dominance is unreasonable and burdens or restricts U.S. commerce and thus is actionable."

Meanwhile, China conducted military drills near Taiwan last month, a reminder that the island sits at the intersection of technology dominance and territorial disputes. Taiwan Semiconductor reportedly plans to raise prices on its advanced chips anyway, apparently unfazed by the saber-rattling.

Business Performance Remains Strong

Here's the interesting part: while Loeb is reducing his exposure, Taiwan Semiconductor's actual business performance has been excellent. In October, the company reported third-quarter net sales of $33.1 billion (989.9 billion New Taiwanese dollars), representing a 30.3% jump year-over-year. That beat analyst expectations of $31.5 billion, and sales also grew 6.0% quarter-over-quarter.

The guidance looked solid too. Taiwan Semiconductor projected fourth-quarter 2025 revenue between $32.20 billion and $33.40 billion, comfortably above the analyst consensus of $31.97 billion. The company expects gross margins of 59% to 61% and operating profit margins of 49% to 51%.

Taiwan Semiconductor also collected 4.77 billion New Taiwanese dollars in government subsidies during Q3 2025. For the first nine months of 2025, total subsidies reached 71.9 billion New Taiwanese dollars. And shareholders got a nice bump: the company raised its third-quarter cash dividend by 20% to 6 New Taiwanese dollars (roughly $0.19) per share, up from 5 New Taiwanese dollars the previous quarter.

Recent Monthly Results Show Momentum

The monthly numbers tell a growth story. In November, Taiwan Semiconductor reported October financial results showing consolidated net revenue of approximately 367.47 billion New Taiwanese dollars, up 16.9% year-over-year and 11.0% from the prior quarter.

The November 2025 figures came in at approximately 343.61 billion New Taiwanese dollars, representing a 24.5% year-over-year increase. The topline did decline 6.5% month-over-month, but these sequential fluctuations are fairly normal in the semiconductor business.

What Analysts Are Saying

Dan Nystedt of TriOrient Investments offered an interesting perspective in an October interview. He noted that Taiwan Semiconductor retains its pivotal global significance, supported by the concept of a "silicon shield protecting Taiwan." The idea is simple: the world needs Taiwan Semiconductor's chips so badly that it provides a layer of geopolitical protection.

Nystedt acknowledged the risk of "a reversal of AI demand or AI hype," but emphasized that Taiwan Semiconductor works closely with customers to gauge real demand and avoid overbuilding capacity. In other words, they're not just chasing the AI bubble blindly.

Doubling Down on AI and Expansion

Despite the geopolitical noise, Taiwan Semiconductor is pushing forward aggressively. In October, Nvidia Corp. (NVDA) introduced the first U.S.-made Blackwell wafer at Taiwan Semiconductor's Phoenix facility, a crucial component for AI chips manufactured on American soil.

The company's Japan arm, Japan Advanced Semiconductor Manufacturing (JASM), signed an agreement with the government of Kikuyō Town in Kumamoto Prefecture to build its second wafer fabrication plant for an investment of $13.9 billion.

In November, Taiwan Semiconductor raised prices across its advanced chip manufacturing processes below 5 nanometers to offset the sharp increase in capital expenditures tied to its 2-nanometer technology expansion. The company also reaffirmed its commitment to expanding its U.S. footprint to support accelerating demand for artificial intelligence-driven chips.

In December, Taiwan Semiconductor confirmed it had begun volume production of its 2-nanometer chips, representing the cutting edge of semiconductor manufacturing.

This month brought more positive news: the company surpassed its previous 52-week high after securing a one-year U.S. export license, allowing it to continue importing U.S. chipmaking equipment for its operations in China.

How the Stock Stacks Up

Over the past year, TSM shares rose around 52.81%, significantly outperforming the 26.42% gain in SP Funds S&P World (ex-US) ETF (SPWO) and absolutely crushing the 18.44% decline in YieldMax TSM Option Income Strategy ETF (TSMY).

Taiwan Semiconductor's share growth even exceeded its closest peers. Nvidia (NVDA) gained 35.40% and Broadcom Inc. (AVGO) rose 51.58% over the same period, both trailing Taiwan Semiconductor's performance.

So what's the takeaway here? Loeb is clearly worried about geopolitical risk, and he's positioning accordingly by reducing exposure over multiple quarters. But the business fundamentals remain strong, the AI tailwinds are real, and the stock has delivered exceptional returns. Sometimes the smartest investors trim winners not because the company is struggling, but because the risk-reward equation has changed. In Taiwan Semiconductor's case, that risk has a name: geopolitics.