Xiaomi's AI Triumph Faces a Smartphone Margin Squeeze

Xiaomi's AI model leads global usage, but soaring memory chip costs crush smartphone margins, sending stock to a 52-week low. The company bets on ecosystem expansion.

Xiaomi's stock is caught in a powerful crosscurrent. While its newly launched artificial intelligence model has rocketed to become the world's most-used on a key platform, its core smartphone business is under severe pressure from soaring memory chip costs. This clash between breakthrough innovation and fundamental margin erosion has sent shares to a 52-week low of 3.35 euros, marking a decline of over 25% since the start of the year.

The company's stealth AI launch has been a stunning success. An anonymous model codenamed "Hunter Alpha" appeared on the OpenRouter platform on March 11, 2026, priced at just $0.30 per million tokens. Within a week, it was revealed as Xiaomi's MiMo-V2-Pro, and it quickly became the platform's most-used offering. It now processes 4.79 trillion tokens weekly on OpenRouter, giving Xiaomi a 21.1% market share there—triple that of the second-place provider and far ahead of OpenAI's 7.5%. On its first official day of commercial availability, the model processed over one trillion tokens.

This technical prowess is backed by strong benchmark results. In the ClawEval test for agentic systems, MiMo-V2-Pro scored 61.5, significantly outperforming GPT-5.2 (50.0). It ranks 8th globally on the Artificial Analysis Intelligence Index and 2nd among Chinese language models. Other rankings place it in the global top five for text, fourth on LabRank, and fifth for code. To monetize this, Xiaomi has introduced a tiered subscription "TokenPlan" in China, with monthly packages from 39 to 659 yuan and an initial 88% discount for developers.

However, this AI victory is unfolding against a grim backdrop for Xiaomi's traditional hardware business. Exploding memory prices are crushing profitability. The company's gross margin in the smartphone segment plummeted to 8.3% in the fourth quarter of 2025 from 12.6%. In response, Xiaomi has taken the unpopular step of raising list prices in China by 200 yuan for models like the Redmi K90 Pro Max and scrapping discount promotions.

Analysts see the cost crisis worsening. TrendForce expects prices for DRAM to surge by up to 63% and for NAND Flash by 75% through the second quarter of 2026, with no relief anticipated before 2028. In a bid to shore up market confidence amid the stock slide, Xiaomi's management initiated a share buyback in early April, spending approximately HK$395 million to repurchase 12.8 million of its own shares.

The company is betting its future on integrating AI across a broader ecosystem and expanding beyond smartphones. A planned 60-billion-yuan (roughly $8.7 billion) investment over three years will fuel new models destined for Xiaomi's "Human-Car-Home" ecosystem. The automotive division, having delivered over 410,000 electric vehicles last year, is targeting 550,000 units for 2026.

All eyes are now on the first-quarter results due at the end of May. This report will provide the clearest evidence yet of whether early price hikes and the push into premium segments can offset the crushing memory chip costs, and if the meteoric rise of its AI division can begin to redefine the company's valuation.