Xiaomi's Billion-Dollar Bet on AI and EVs Collides with Smartphone Reality

Xiaomi's stock plunges over 25% in 2026 as smartphone margins collapse. The company pivots to premium phones, AI, and EVs, investing RMB 60B to counter decline.

Xiaomi's stock has plunged to a new 52-week low of €3.36, a stark contradiction to the company's aggressive spending on share buybacks and future technologies. Since the start of 2026, the share price has fallen by over 25%, widening the gap to its 200-day moving average to a concerning 29.6 percent. This decline persists despite management signaling confidence through substantial repurchases, acquiring 10.89 million shares for approximately HKD 333.85 million across two days in mid-April.

The core of Xiaomi's problem is a severe contraction in its foundational smartphone business. The global market shrank by six percent in Q1 2026, but Xiaomi was hit hardest among the top five manufacturers, suffering a 19 percent year-on-year drop in shipments. While it maintains a 12 percent global market share, its heavy reliance on the price-sensitive entry-level segment has become a major liability. Soaring costs for DRAM and NAND memory chips, driven by capacity allocation to lucrative AI systems, are crushing margins. This pressure was already evident in Q4 2025, when adjusted profit fell by 24 percent.

In response, Xiaomi is executing a radical portfolio overhaul. The company is deliberately scaling back low-margin volume models to concentrate resources on premium devices. The strategy is showing early promise in China, where the high-demand Xiaomi 17 series is expected to lift average selling prices. This shift is a direct assault on the dominance of Apple and Samsung, but it comes at a short-term cost of market share and profitability.

Concurrently, the company is making massive bets on artificial intelligence and electric vehicles to drive future growth. Its MiMo-V2-Pro AI model has processed one trillion API tokens since its commercial launch. Over the next three years, Xiaomi plans to invest RMB 60 billion in AI research and infrastructure, with RMB 16 billion earmarked for the current fiscal year 2026. Approximately 70 percent of this sum is dedicated directly to developing new large language models and AI agents.

The electric vehicle division is also posting impressive figures. The new SU7 generation secured 15,000 firm orders within 34 minutes of launch, a figure that has since grown to over 40,000. Xiaomi has set an ambitious annual delivery target of 550,000 units, building on the 411,000 vehicles delivered the previous year.

Further expanding its hardware ecosystem, Xiaomi is launching a broad PC offensive. On April 21, 2026, the company will unveil the new Redmi Book Pro laptop generation alongside the Redmi K90 Max smartphone. The 14-inch and 16-inch laptops will feature Intel's latest Panther Lake processor, high-resolution LCD displays, and battery life of up to 37 hours, positioning them as direct competitors to Apple's MacBook Pro M5 series in more accessible price segments.

Despite these strategic initiatives, macroeconomic headwinds are intensifying the stock's decline. US counter-tariffs have weighed on Chinese tech stocks since early April, pressuring the Hang Seng Index and the technology sector. With a 14-day Relative Strength Index reading of 70, the stock remains technically overbought in the short term, even after its recent slide. The company's billion-dollar buyback program is unlikely to neutralize this broader market pressure alone. The critical test will be whether upcoming quarterly results can demonstrate that profits from AI, EVs, and premium hardware can genuinely compensate for the severe margin compression in the core smartphone business.