Xiaomi's Margin Squeeze Tests Investor Faith in Its EV and AI Pivot

Xiaomi's stock plunges to a 52-week low amid collapsing smartphone profitability and investor fears over aggressive, margin-squeezing electric vehicle pricing, despite strong EV demand.

Xiaomi's stock has plunged to a 52-week low, trading around €3.37, as the tech giant faces a perfect storm of collapsing smartphone profitability and investor skepticism over its aggressive electric vehicle pricing. This dual pressure has erased roughly a third of the company's value over the past year, despite significant operational successes in its new business lines.

The core smartphone division is under severe strain. To combat soaring memory chip costs, Xiaomi has been forced to raise list prices in China, scrapping discounts and increasing tags by 200 Yuan for models like the Redmi K90 Pro Max. The financial impact is stark: the segment's gross margin plummeted from 12.6% to 8.3% in the fourth quarter. Industry analysts from TrendForce warn the situation is deteriorating, forecasting DRAM prices could surge up to 63% and NAND Flash prices up to 75% by the second quarter of 2026, with no relief expected before 2028.

Against this bleak backdrop for its traditional business, Xiaomi's foray into electric vehicles is delivering strong demand but raising fresh concerns. The updated SU7 sedan, launched on March 19, garnered over 40,000 firm orders within weeks. The vehicle boasts significant tech upgrades including LiDAR, 4D millimeter-wave radar, and Nvidia's Thor computing platform as standard. However, CEO Lei Jun acknowledged these over one hundred hardware and software improvements added approximately 20,000 Yuan in material costs, while the sale price saw almost no increase. The base model remains priced at 219,900 Yuan, well below a Tesla Model 3. The market's reaction was brutal, sending shares down 8.59% in Hong Kong the day after the launch on fears for EV segment margins.

The company's broader financials compound the worry. Fourth-quarter adjusted profit fell 24% year-over-year, pressured by higher component costs and intense competition. Macroeconomic headwinds add another layer, with the entire Hong Kong tech sector facing pressure following comprehensive U.S. counter-tariffs imposed in April.

In response to the stock slide, management launched a share buyback program in early April, repurchasing 12.8 million of its own shares for about HK$395 million. This move was flanked by substantial inflows from mainland Chinese institutional investors.

Xiaomi is betting its future on scaling new ventures to counterbalance these pressures. In artificial intelligence, its MiMo-V2-Pro language model is gaining traction. It processed over one trillion tokens on its first day of commercial release and ranks eighth globally on the Artificial Analysis Intelligence Index. In other benchmarks, it places in the global top five for text and code arenas. The company is monetizing this through a tiered subscription model.

The automotive arm is also pushing ahead ambitiously. After delivering 411,837 vehicles in 2025, the target for 2026 is set at 550,000 units, with four to six new models planned. Despite these growth narratives, Xiaomi's valuation of around 17 times trailing earnings sits well below Western EV peers.

All eyes are now on the first-quarter results due at the end of May. This report will provide the clearest evidence yet of whether early smartphone price hikes and the costly EV push can sufficiently offset the fundamental cost crisis eroding its core profitability.