Xiaomi’s Short Sellers Dig In as SUV Debut and Chip Woes Create a High-Stakes Tug-of-War

Xiaomi shares drop 5.5% despite SkyNomad SUV debut, as massive short positions and rising chip costs overshadow automotive ambitions.

The spectacle of a glitzy SUV launch wasn’t enough to shield Xiaomi from a sharp sell-off on Thursday. Shares tumbled 5.5% to €3.40 in Hong Kong, even as the company unveiled its SkyNomad SUV lineup — a disconnect that highlights the deepening fault lines beneath the stock’s recent rally.

Nearly 1.45 billion Xiaomi shares are now held in short positions, according to exchange filings. That massive bearish bet has taken on new significance after Thursday’s drop, which erased a chunk of the 37.57% gain the stock had racked up over the prior 30 trading days. For all that recent momentum, the equity remains 47.73% below its 52-week high from September 2025 and has shed 21.43% since the start of the year.

A Split-Screen Story: SUV Ambition Meets Market Skepticism

Xiaomi’s automotive ambitions took center stage this week with the launch of the SkyNomad series — the N90 Max and N70 Max — built on the company’s new Kunlun architecture. These extended-range electric vehicles (EREVs) boast a combined range of up to 1,705 kilometres, with the N70 Max offering 505 kilometres on pure electric power. Pre-orders opened in China on Thursday, with deliveries slated to begin in September 2026.

The pricing is aggressive: the N90 Max starts at 299,900 yuan (roughly €38,700), undercutting rivals such as Nio and Li Auto. Yet the broader market backdrop is unforgiving. China’s auto market contracted 20% in the first half of 2026, and Xiaomi has delivered only around 185,000 vehicles so far — roughly a third of its full-year target. The central question is whether SkyNomad can generate enough volume to close that gap without squeezing margins.

Investors appear unconvinced. Thursday’s decline suggests either that the SUV launch was already priced in or that the market views the distance to the annual sales target as simply too wide to bridge.

The Cost Side of the Equation: Chip Prices Bite

While the automotive division grabs headlines, the core smartphone business is facing a more immediate threat. Qualcomm plans to raise prices on its Snapdragon processors by a double-digit percentage from September, hitting Xiaomi just as it prepares to launch a new flagship handset this autumn.

The pain is most acute in Xiaomi’s lower-tier models, where memory components now account for roughly 60% of production costs. This is precisely the segment where the company is pushing hardest: it has raised its 2026 smartphone delivery target from around 90 million units to 110 million, with the bulk of the extra volume coming from cheaper devices. The strategy amplifies exposure to rising component costs, and analysts are watching third-quarter margins closely for signs of strain.

Warnings from the semiconductor industry about potential DRAM shortages extending into mid-2027 only add to the unease.

Buybacks and a Paper Windfall

Xiaomi has not been idle on the defensive front. Between June 3 and July 15, the company repurchased shares in 14 tranches, buying back roughly 79.8 million shares — equivalent to 0.31% of total equity. The buyback price ranged from around HK$28.65 at the start to HK$25.82 at the end, signalling management’s willingness to support the stock even as it softened.

There is also a potential bright spot on the balance sheet. Xiaomi was an early investor in CXMT, a memory chip maker that recently went public. The IPO has lifted the book value of that stake, though the holding has neither been sold nor publicly sized — meaning the gain remains purely notional for now.

The Squeeze Potential

The sheer size of the short position creates a double-edged dynamic. If positive news — such as strong SkyNomad pre-orders or better-than-expected third-quarter earnings — triggers a short squeeze, the resulting covering could amplify any upside sharply. The stock’s relative strength index (RSI) of 65.1 suggests it is not yet overbought, leaving room for a rebound.

But the risks are equally visible. The 200-day moving average sits at €3.74, and the stock remains below that level — a technical signal that the broader trend is still bruised, despite the 45.45% bounce from the 52-week low. A break below the 100-day average at €3.22 would open the door to further downside.

What Comes Next

Two data points will shape the narrative in the weeks ahead. August will bring the first hard figures on SkyNomad pre-orders, offering a reality check on consumer appetite. Then comes the third-quarter earnings report, which will reveal how deeply rising chip and memory costs have cut into margins.

For now, Xiaomi is caught between a promising product cycle and a punishing cost environment, with a record short position ready to amplify the move in either direction. The next few months will determine whether the bears or the bulls have read the tea leaves correctly.