Xiaomi's AI and Auto Ambitions Face a Valuation Wall

Despite AI model success and strong EV orders, Xiaomi's stock hits a 52-week low as its costly transformation reshapes profits and squeezes margins.

Xiaomi's stock is trading at a 52-week low, a stark contrast to the operational momentum building within the company. Since the start of the year, the share price has fallen approximately 24 percent, with the equity recently quoted around €3.41. This disconnect highlights a market deeply skeptical of the Chinese tech giant's costly transformation, even as it posts tangible advances in artificial intelligence and electric vehicles.

The centerpiece of its AI push is the MiMo-V2-Pro language model. In a significant validation, the model secured fifth place globally in the Text Arena, a double-blind ranking where real users anonymously judge response quality. This places it directly behind only models from Anthropic and OpenAI. In the separate Artificial Analysis Intelligence Index, which ranks models with a trillion parameters, MiMo-V2-Pro holds eighth place worldwide, making it the second-best Chinese language model overall. The project is led by Fuli Luo, a former member of the DeepSeek-R1 team.

Commercialization efforts are scaling rapidly. Xiaomi officially entered the AI API market in early April. On its first day, the MiMo platform processed over one trillion tokens, and weekly usage for the MiMo series has now surpassed four trillion tokens. The company is targeting developers with its TokenPlan subscription model, offering an 88 percent introductory discount. A key selling point is cost: executing a full intelligence evaluation suite with MiMo-V2-Pro costs about $348, a fraction of the over $2,300 required for comparable models from leading Western firms.

Parallel to its AI drive, Xiaomi's electric vehicle business is gaining concrete traction. The updated SU7 model, unveiled on March 19, secured over 30,000 binding orders—15,000 of those within the first 34 minutes. The company is holding firm to its 2026 delivery target of 550,000 vehicles. Technologically, all variants now come standard with LiDAR, 4D millimeter-wave radar, and Nvidia's Thor-U computing platform, features typically reserved for higher trim levels. Management believes that, if current growth persists, the automotive division's revenue could overtake the smartphone business within the 2026 fiscal year.

This strategic pivot, however, comes at a significant financial cost and is radically reshaping the company's profit profile. The gross profit contribution from the core smartphone segment has collapsed from over 40 percent in the first quarter of 2024 to just 15.1 percent in Q4 2025. Meanwhile, the segment encompassing "Smart EV, AI and new initiatives" has grown from nearly zero to account for 34.7 percent of gross profit in the same period.

This structural shift is pressuring the bottom line. Xiaomi's adjusted net profit for the fourth quarter of 2025 fell by 24 percent year-over-year, squeezed by rising memory chip costs and intensifying competition. External macro pressures, namely the escalating U.S.-China tariff conflict, have further weighed on Hong Kong-listed tech valuations.

For investors, the critical question is timing. While initiatives in humanoid robots for its own EV factories and a proprietary large language model are impressive, they have yet to move the revenue needle in a material way. The stock is unlikely to find sustainable footing until the combined profit contributions from the MiMo platform and the EV segment can decisively offset the declines in the legacy smartphone business and the persistent cost headwinds. The company's ambitious dual-engine strategy is running, but the market is waiting for it to truly take off.