Xiaomi's AI Supercluster and Titan Alloy Offensive Collides with a Memory-Chip Margin Meltdown

Xiaomi's massive investments in AI infrastructure and EVs fail to offset a margin squeeze in smartphones, as rising memory costs slash shipment targets and send stock near 52-week low.

The gulf between Xiaomi’s operational ambition and its stock-market reality has rarely been wider. The Chinese tech conglomerate is simultaneously pouring billions into artificial-intelligence infrastructure, rolling out advanced alloys for its electric-vehicle lineup, and executing its largest-ever share buyback. Yet the stock has surrendered nearly 41% since January, hovering just above its 52-week low of €2.34. The culprit: a relentless margin squeeze in the smartphone core business that neither a record buyback nor a push into EVs and AI has been able to offset.

Xiaomi has more than doubled down on computing capacity. Together with cloud partner Kingsoft, it is channelling over ¥10 billion (€1.3 billion) into new graphics processors, part of a broader ¥60 billion investment blueprint. Kingsoft has responded by raising its own 2026 capital-expenditure budget to ¥15 billion, and reports suggest the joint procurement volume could eventually exceed ¥100 billion. The infrastructure build-out is aimed at an “extremely large” computing cluster, underscoring the group’s bet that AI will become a future profit engine.

On the automotive front, the company is taking a materials-driven approach. A new alloy called Titan Alloy 2.0 will be used in the rear underbody of the SU7 and YU7 models, produced in a single casting step. The alloy incorporates recycled aluminium, cutting the carbon footprint by 93% versus conventional primary aluminium. Given a planned annual production run of 550,000 vehicles, the move is expected to save roughly 450,000 tonnes of CO? a year. The EV division, meanwhile, delivered 30,000 vehicles in June for the third consecutive month, and first-half deliveries are expected to come in at around 180,000 units.

But the stock has taken no comfort from these milestones. Even as the buyback programme — the biggest in Xiaomi’s history, with a maximum size of HK$20 billion over twelve months — has scooped up 30.1 million of its own shares since June, short sellers have circled. They now hold about 9% of the free float. The share price inched up 7.77% on the week to close at €2.65 on Friday, but that barely dents a year-to-date decline of almost 41%. The 50-day moving average at €3.06 sits far above the current level, while the 200-day average is at €3.97 — a gap of roughly 33%.

The fundamental drag is plain: memory-chip costs are soaring, and Xiaomi’s traditional smartphone business is absorbing the blow. The company has already slashed its handset shipment target for the year from 135 million units to just 95 million, a painful retreat that highlights how rising input costs are devouring margins. The new Skynomad brand, launched partly to shield the core Xiaomi brand from the vicious price war in the Chinese market, shows management is trying to compartmentalise the damage, but the earnings pressure remains acute.

Optimists argue that the buyback and the EV uptick could mark a turning point. The stock’s relative-strength index has crept above 40, signalling that the oversold conditions of recent weeks are easing. Yet the bärish camp, backed by a record short interest, counters that the memory-chip headwind will persist until either chip prices fall or Xiaomi successfully passes higher costs to consumers. The next major test comes on 26 August 2026, when the company reports its quarterly results. Analysts will be watching two numbers above all: the smartphone margin and the EV assembly rate. Until those improve, the stock’s retreat is unlikely to reverse.