Xiaomi's Bold Bet on EVs and AI Confronts a Smartphone Price War

Xiaomi's smartphone margins collapse as memory chip costs surge, pressuring stock. Meanwhile, its electric vehicle deliveries boom and AI model gains top global rankings.

Xiaomi's stock price has plunged to a 52-week low of EUR 3.35, reflecting a stark disconnect between its ambitious future and a painful present. While the Chinese tech giant races ahead in electric vehicles and artificial intelligence, its core smartphone business is caught in a severe margin squeeze, forcing unpopular price hikes for consumers.

The immediate pressure stems from a structural crisis in the memory chip supply chain. To combat soaring costs, Xiaomi has raised list prices in China for models like the Redmi K90 Pro Max by 200 Yuan and scrapped promotional discounts. The impact is severe: the smartphone segment's gross margin collapsed from 12.6% to 8.3% in the fourth quarter of 2025. Analysts at TrendForce warn the situation will worsen, forecasting DRAM prices could surge up to 63% and NAND Flash by 75% through Q2 2026, with no relief expected before 2028.

This fundamental pressure contributed to a 33% decline in Xiaomi's share price over the past twelve months and a drop of over 25% since the start of the year. In a bid to restore confidence, management launched a share buyback program in early April, spending approximately HKD 395 million to repurchase 12.8 million of its own shares, a move supported by significant inflows from mainland Chinese institutional investors.

Against this challenging backdrop, Xiaomi's investments in new growth engines are delivering tangible results. The company's EV division is gaining remarkable traction. In March 2026 alone, it delivered 21,440 electric cars. The launch of the new SU7 sedan for the 2026 model year saw over 15,000 firm orders placed within just 34 minutes of sales opening, a figure that swelled to more than 30,000 three days later, with the YU7 SUV also maintaining stable demand.

For the full year 2025, Xiaomi delivered around 411,000 EVs, driving segment revenue up nearly 224% to CNY 106.1 billion. Crucially, the EV unit turned its first operating profit of CNY 0.9 billion. The target for 2026 is even more ambitious: 550,000 vehicle deliveries.

Simultaneously, Xiaomi's artificial intelligence initiatives are showing strong promise. Its MiMo-V2-Pro large language model processed over one trillion tokens on its first day of commercial availability. The model ranks among the global elite, placing in the top five worldwide in the Text Arena ranking (behind Anthropic, OpenAI, and Google), fourth globally in LabRank, and fifth in the Code Arena. The company plans to monetize this through a tiered subscription model.

These growth bets require immense capital. Research and development expenses surged almost 38% in 2025 to CNY 33.1 billion. Xiaomi has committed to investing at least an additional CNY 60 billion in AI over the next three years, underlining its strategy to build an integrated ecosystem of smartphones, smart-home devices, and electric cars.

All eyes are now on the quarterly results scheduled for release on May 27, 2026. This report will provide the clearest evidence yet of whether early price increases in smartphones and the rapid scaling of EVs and AI are sufficient to offset the severe memory chip cost inflation and reverse the company's recent profit decline.