Fang DongxuFeature China/Future Publishing/Getty Images
The world's largest chipmaker, Taiwan Semiconductor Manufacturing, just saw its revenue drop for the first time in four years.
The company said Thursday that second-quarter revenue declined nearly 10% compared to the same time a year ago, and annual net profits dropped 23%.
Shares in Taiwan dropped more than 3%, and were down about 0.5% in US markets Friday.
Unfortunately for TSMC — and the chip sector at large — this doesn't exactly come as a surprise.
While Nvidia has outperformed just about every major tech stock this year with a more than 200% surge, chipmakers generally have been stuck in a malaise: Demand is waning, personal computer and smart phone sales are down, and the outlook for a rebound is bleak amid a muddled global economic picture.
Chip sales in the year through May were down 21%, according to Semiconductor Industry Association data cited by the Wall Street Journal, and companies expect to slog through weak demand for some time more. TSMC executives don't expect a rebound to arrive this year, and this week the company said full-year revenue would decline more than expected, by about 10% compared to last year's figures.
The wider semiconductor space didn't react favorably. The PHLX Semiconductor Index dipped more than 3.5% Thursday, with every name in the batch closing in the red. The index pared some of those losses Friday.
Investors were also disappointed by the announcement that construction of TSMC's big chip plant in Arizona would be delayed until 2025 because the company can't find enough specialist workers.
"While we are working to improve the situation, including sending experienced technicians from Taiwan to train the local skilled workers for a short period of time, we expect the production schedule of N4 process technology to be pushed out to 2025," TSMC chairman Mark Liu said Thursday.
Investors have flocked to AI-adjacent names since the end of last year, when ChatGPT went viral. Generative language processors like OpenAI's program require chip technology and products made by the same companies that saw their stocks dip this week.
While Nvidia has reaped huge gains from the AI craze, TSMC isn't in the same boat. In its earnings report, it said Thursday that AI accounts for a mere 6% of its current revenue, whereas one-third of its revenue is for smartphones.
Wall Street, for its part, expects Apple's iPhone sales to drop 4% in the fiscal year up to September, according to the Journal.
Still, TSMC has an upbeat forecast for its AI business over the coming years, but in the near-term it's still staring down production and supply-chain snags.