The world's largest chipmaker just issued a warning that the industry's red-hot growth could slow

• TSMC sees growth in the microchip industry slowing to 10%, it said in a post-earnings call.

• The dimmed outlook comes on slowdown expectations for automotive chips.

• But the firm still projects strong AI-led revenue growth in the second-quarter.

Microchips aren't making the inventory comeback industry optimists have hoped for, compelling the world's top chip producer to dim its outlook.

Taiwan Semiconductor Manufacturing now expects the market to expand 10%, excluding memory chips. That's down from the "more than 10%" forecast it laid out months prior.

The update was offered during the firm's post-earnings call with analysts, and is premised on TSMC's shifting stance on automotive chips, used in vehicles. Though it previously expected demand in this sector to rise through the year, it now sees a contraction as more likely. Further explanation was not provided.

"Looking at 2024, macro economy and geopolitical uncertainties persist, which could further affect consumer confidence and end-market demand," CEO C.C. Wei said on the analyst call.

That's not to say the firm has turned gloomy about its own prospects, instead forecasting its second-quarter sales to rise by as much as 30%.

"Almost all the AI innovators are working with TSMC to address the insatiable AI-related demand for energy efficient computing power," Wei said, also citing high demand for AI-led data centers.

The bell-weather firm is central to AI's development, as it's the principal manufacturing hub for tech leaders like Nvidia and Apple. In fact, AI-related chips will account for a tenth of revenue this year, before taking up a fifth of this figure in the coming four years.

While TSMC beat both revenue and profit expectations in the first quarter, ADRs on its stock fell as much as 6% on Thursday, amid the dampened industry outlook.

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