Xiaomi’s Rally Rests on Paper Gains and a Short Squeeze as Chip Costs Loom

Xiaomi shares surge 35% in 30 days on CXMT IPO gains and short squeeze, but overbought RSI, Qualcomm price hikes, and EV losses cloud the outlook.

The stock has staged a dramatic recovery, but the foundations of that move look far from solid. Xiaomi shares jumped 8% on Wednesday to €3.60, extending a 30-day run that has lifted the stock by 35.76%. Since hitting a 52-week low on June 26, the equity has clawed back nearly 54% — a steep ascent that has pushed the relative strength index to 76.4, firmly into overbought territory.

That technical heat is a warning. The stock still trades roughly 4% below its 200-day moving average of €3.75, a level that would need to be breached to confirm a genuine trend reversal. For now, the rally looks like a powerful but fragile counter-move within a longer downtrend — the shares remain more than 44% below their 52-week high.

The CXMT Effect: Spectacular but Hollow

A major driver of the recent surge has been the Shanghai IPO of CXMT, the Chinese memory-chip maker in which Xiaomi holds an early-stage minority stake. CXMT shares closed Monday at a 466% premium to their issue price, inflating the book value of Xiaomi’s holding. Yet this is a paper gain, not a cash event. Xiaomi has neither disclosed the size of its stake nor sold any shares, meaning the windfall has no direct impact on operating cash flow or margins.

The market has nonetheless treated the CXMT pop as a catalyst, and it has been amplified by a short-squeeze dynamic. Hong Kong exchange data shows roughly 1.45 billion Xiaomi shares are currently sold short. As the stock climbed, short sellers were forced to cover, adding momentum that could fade quickly once the news flow settles.

SUV Ambitions Meet a Key Test

Xiaomi is now betting that its automotive ambitions can sustain the rally. On the evening of July 30, the company will unveil its “Xiaomi Kunlun” technology architecture alongside two new electric SUVs: the 7-seat SkyNomad N90 Max and the 5-seat SkyNomad N70 Max. The vehicles feature rotating seats and a pop-up roof tent, positioning them as “mobile living rooms” rather than conventional family cars.

The delivery target is ambitious: 550,000 vehicles this year. Monthly deliveries already exceeded 30,000 units in April, driven by the new SU7 generation. The smartphone division is also aiming higher, with the company unexpectedly raising its annual sales target from 90 million to 110 million devices.

Whether these targets translate into sustainable profits is another question. The SUV launch comes with high upfront costs, and the EV business remains loss-making for now.

The Real Headwind: Qualcomm’s Price Hike

The most significant threat to Xiaomi’s margin story is brewing in the chip supply chain. Starting in September, Qualcomm plans to raise prices on its Snapdragon processors by a double-digit percentage. The timing is brutal: Xiaomi is preparing to launch its new flagship smartphone in the autumn, precisely when component costs will spike.

The impact is most acute in the budget segment, where memory chips now account for roughly 60% of production costs. Xiaomi has already absorbed a sharp profit decline — the stock still trades nearly 49% below its 52-week high of €6.51 — and the Qualcomm increase threatens to squeeze margins further.

Two Timelines, One Verdict

In the near term, the market’s reaction to the July 30 SUV event will determine whether the rally holds. A sustained move above the 200-day moving average would signal a genuine turnaround. A reversal below recent support levels would confirm the move as a short-lived squeeze within a broader trading range.

The structural test comes later. Third-quarter earnings will reveal how deeply the Qualcomm price hikes cut into smartphone margins. Until then, the current rally rests on paper gains from CXMT, short-covering momentum, and product promises — none of which have yet been validated by operating results. With annualized volatility above 51%, sharp swings in either direction remain the most likely outcome.