Xiaomi's AI Dominance and EV Push Clash with Soaring Memory Costs

Xiaomi's AI model leads globally, but soaring memory chip costs crush smartphone margins, sending shares to a 52-week low despite EV revenue growth.

Xiaomi's stock is caught in a paradox. The Chinese tech giant now operates the world's most-used large language model while simultaneously watching its core smartphone profitability erode. This clash between a booming AI division and a hardware business under severe cost pressure has sent shares to a new 52-week low of 3.40 euros, marking a 24% decline since the start of the year.

The company's ambitious foray into electric vehicles adds another layer of complexity. On one track, Xiaomi is testing a near-1,000 horsepower performance SUV, the YU7 GT, on Germany's Nürburgring, equipped with adaptive air suspension and carbon-ceramic brakes. On another, it is pursuing volume sales in China with a new, lighter base variant of the YU7 featuring a single 235 kW rear motor and a CATL LFP battery. This dual automotive strategy delivered a 123% revenue surge to 37.2 billion yuan in Q4 2025 for the vehicle segment.

Yet, investor skepticism remains entrenched. A recent buyback of 7.9 million shares failed to lift the stock, which now trades roughly 49% below its June 2025 peak. The share price of 3.41 euros sits far below its 200-day moving average of 4.82 euros, underscoring a persistent downtrend.

The primary headwind stems from a global memory chip shortage. Company President Lu Weibing stated on Weibo that prices for memory components have nearly quadrupled compared to the first quarter of last year. The cost for a combination of 12 GB RAM and 512 GB of internal storage has risen by approximately 1,500 yuan. This surge is directly hitting margins; the smartphone segment's gross margin collapsed from 12.6% for full-year 2024 to just 8.3% in the fourth quarter. In response, Xiaomi will raise the price of its Redmi K90 Pro Max by 200 yuan starting April 11.

This cost crisis is structural. AI data centers are hoarding global memory capacity, prompting chipmakers to prioritize these lucrative large-scale orders. Analysts at TrendForce forecast price jumps of up to 63% for DRAM and 75% for NAND Flash in the second quarter of 2026.

Ironically, Xiaomi's own AI success is part of this disruptive trend. Its MiMo-V2-Pro model, initially launched anonymously as "Hunter Alpha" on OpenRouter, has become a global leader. It processes 4.79 trillion tokens weekly and holds a market share triple that of any OpenAI model. Priced at just $1 per million input tokens and $3 per million output tokens, it significantly undercuts competitors like Claude Opus 4.6. The model ranks eighth worldwide on the Artificial Analysis Intelligence Index and scores 78% on the SWE-bench Verified software engineering benchmark.

The company now trades at a price-to-earnings ratio of around 17 based on the past twelve months, a discount to many comparable electric vehicle makers. All eyes are on the first-quarter results due in late May. The report will reveal the true depth of the smartphone margin squeeze and whether the high-flying AI and auto divisions can start to materially offset the pain in Xiaomi's most important business.