Diamond Hill Capital, a First Eagle Investment Management company, released its second-quarter 2026 investor letter for the Diamond Hill International Fund. The fund posted a 7.76% return for the period, trailing the MSCI ACWI ex USA Index, which advanced 14.49%. Stock selection in health care and consumer discretionary contributed positively, while positions in information technology and consumer staples weighed on results.
Global Equity Backdrop in Q2 2026
International equities moved higher during the quarter, propelled by AI-related semiconductor names. Taiwan and South Korea led gains, while Europe and Japan delivered mixed performance. European markets benefited from improving economic data and easing inflation, though dispersion across countries remained wide. Japanese equities rose on corporate governance reforms, though a stronger yen and global trade uncertainty capped upside. Emerging markets outperformed developed peers, driven by robust demand for AI infrastructure in Taiwan and South Korea, while Chinese equities declined. The information technology sector ranked as the top-performing group globally.
The investment team noted that narrow market leadership creates both challenges and opportunities for a bottom-up, valuation-driven approach.
Taiwan Semiconductor Manufacturing Co. (NYSE: TSM) Highlighted as Key Contributor
The letter singled out Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) as a notable performance driver. TSMC is the world’s leading contract chip manufacturer, producing advanced semiconductors for major global technology companies. As of September 4, 2026, the stock closed at $428.91 per share, with a market capitalization of $1.97 trillion. Shares returned 2.49% over the prior month and gained 73.51% over the trailing 52 weeks.
Diamond Hill International Fund offered the following assessment in its Q2 2026 letter:
“Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is the world’s largest dedicated chip foundry, holding approximately 70% market share and advanced manufacturing capabilities. Shares outperformed after the company announced strong demand for its semiconductor manufacturing services and increased its revenue outlook, driven by AI and high-performance computing chips.”
Hedge Fund Ownership Trends
TSMC ranks sixth on the list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to Insider Monkey’s database, 249 hedge fund portfolios held TSMC at the end of Q2 2026, up from 234 in the previous quarter.
While the firm acknowledges TSMC’s investment merits, its analysts suggest certain AI-focused equities may offer greater upside with less downside risk. For investors seeking an extremely undervalued AI stock positioned to benefit from tariff policies and onshoring trends, Insider Monkey publishes a free report on the best short-term AI stock.
Related Coverage
Insider Monkey has also covered Artisan Global Opportunities Fund’s perspective on TSMC. Readers can access additional hedge fund investor letters for Q2 2026 on the site.
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This article is originally published at Insider Monkey.
