Xiaomi’s AI Breakthrough Can’t Mask the Pain From Soaring Chip Costs

Xiaomi unveils top-tier AI model MiMo-V2.5-Pro but stock falls to €3.29 low amid surging costs, smartphone margin pressure, and EV delivery slowdown.

For a company that just unveiled a top-tier artificial intelligence model, Xiaomi’s stock is behaving as if it has no idea. Shares touched a fresh 52-week low of €3.29 on the back of the company’s investor day in Peking, even as management laid out an ambitious roadmap spanning AI, smartphones, and electric vehicles. The disconnect between technological progress and market sentiment has rarely been starker.

The centerpiece of the event was MiMo-V2.5-Pro, a mixture-of-experts model boasting over a trillion parameters that natively processes image, audio, and video in a single architecture. The Artificial Analysis Intelligence Index ranks it the best open-source model globally, tying with Kimi K2.6. Citigroup placed it among the world’s top four for both foundational intelligence and agentic capabilities. On the ClawEval benchmark, it delivers results comparable to Claude Opus 4.6, Gemini 3.1 Pro, and GPT-5.4 while using 40 to 60 percent fewer tokens. The model is released under an MIT license, making it freely available for commercial use.

Xiaomi outlined three monetization pathways for its AI push: embedding features in hardware to justify premium pricing, subscription services around the MiClaw Agent, and API access for developers. Early traction is encouraging — 35 percent of users testing token plans have converted to paying customers. Yet JPMorgan struck a cautious tone, arguing that these new revenue streams will take time to become meaningful and offer little near-term catalyst for the stock.

That skepticism is understandable given the headwinds in Xiaomi’s core business. Component costs have surged dramatically since the start of 2025, with memory chip prices jumping as much as 90 percent in the first quarter alone. The smartphone segment’s gross profit plunged more than 40 percent in the fourth quarter of 2025. Management acknowledged that price increases on handsets are now unavoidable and expects the overall market to shrink by at least 10 percent in 2026, though it hopes higher average selling prices will offset the volume decline. Last year, Xiaomi shipped roughly 13.35 million premium smartphones, a 24 percent increase from the prior year.

In a surprising product timeline shift, the Xiaomi 17T and 17T Pro are now slated for release in the second quarter of 2026 — roughly four months earlier than the traditional September launch window for the T-series. The accelerated schedule suggests the company is trying to get ahead of cost pressures and competitive dynamics.

The electric vehicle division, meanwhile, is navigating its own challenges. First-quarter 2026 deliveries came in at around 79,000 vehicles, less than half the 145,000 units handed over in the final quarter of 2025. To hit the full-year target of 550,000 deliveries, Xiaomi needs to average more than 52,000 vehicles per month for the remainder of the year. Management provided concrete timing for international expansion for the first time: the European market entry is set for the second half of 2027, with right-hand-drive markets following in the first half of 2028. The company’s R&D and design center in Munich, which opened in September 2025, will serve as the base for that push.

Xiaomi is also experimenting with humanoid robots in its EV factory, where individual stations can already operate continuously for up to three hours. Management estimates it will take three to five years before the robots can work seamlessly across multiple stations without errors.

On the financial side, the company has been aggressive in trying to support its stock. Through the end of April, it had repurchased shares worth HK$7.4 billion — more than in all of 2025. The buyback blitz has failed to halt the slide. The stock now sits roughly 51 percent below its 52-week high of €6.69 and has lost nearly 27 percent since the start of the year.

Xiaomi has committed to spending 200 billion yuan on research and development over five years, with more than 60 billion yuan allocated to AI alone over three years. The 2026 R&D budget already exceeds 40 billion yuan. The MiMo team is already working on the next model generation, focused on deeper reasoning capabilities.

The next real test comes in May, when the board meets to approve first-quarter 2026 earnings. That will reveal in hard numbers just how deeply cost inflation and margin compression have cut into the core business — and whether the AI story can eventually close the gap between ambition and a stock stuck at the bottom.