Xiaomi Shareholders Grasp for Floor as Memory Costs and EV Losses Double-Team the Stock

Xiaomi shares hover near a 52-week trough after a 60% decline from September peak, squeezed by surging memory-chip costs and widening EV losses despite a record smartphone ASP.

The stock has clawed back roughly 6% over the past seven trading sessions, but at HK$2.65 (€2.60), it still sits just 11% above a 52-week trough that marks one of the company's most brutal slides on record. Since peaking in September 2025, Xiaomi has shed 60% of its market value, and the relative strength index at 36.1 suggests the selling may be technically exhausted — a condition that often prefaces a bounce, but rarely a trend reversal on its own.

The problem is not a single wound but two open fractures. On one side, Xiaomi’s smartphone division is being crushed by a roughly 100% year-on-year surge in memory-chip costs, a supply squeeze that analysts at Jefferies expect to persist well into 2027. On the other, the company’s electric-vehicle venture has reverted to deep losses after briefly touching breakeven, just as Beijing halves the purchase-tax subsidies that had propped up consumer demand.

First-Quarter Snapshot: Smartphones Slump, EVs Bleed

The numbers for the first quarter of 2026 lay bare the pressure. Total revenue fell 11% to about 99 billion yuan, while adjusted net income plunged 43% to 6.1 billion yuan. The operating margin collapsed from 9% to a razor-thin 3%, driven almost entirely by the soaring bill for memory components.

Xiaomi did manage to push its average smartphone selling price to a record 1,310 yuan, but that feat could not offset the margin erosion on 33.8 million devices shipped. The handset unit’s operating profit took a direct hit.

Over in the EV business, deliveries edged up to nearly 81,000 vehicles in the quarter, and segment revenue rose to roughly 20 billion yuan. Yet the operating loss widened to 3.1 billion yuan — equivalent to about $5,600 for every car sold. That reversal is particularly jarring after two consecutive quarters of breakeven, which had fueled hopes that the automotive side might quickly become self-sustaining.

President Lu Weibing has already warned that the automaking gross margin for 2026 will not surpass last year’s level. The halving of purchase-tax incentives is expected to force more price concessions, adding fresh pressure in an already vicious price war.

Analyst Split: Jefferies Cuts, Goldman Stays Bullish

Jefferies analyst Edison Lee downgraded the stock from Hold to Underperform and slashed his 12-month price target to HK$25.49, citing the weaker-than-expected first-quarter operating result and the structural cost headwind from memory chips. His team sees no near-term relief from the chip supply chain.

Goldman Sachs, by contrast, trimmed its price target but kept a Buy rating, leaning on a sum-of-the-parts valuation that assigns meaningful worth to Xiaomi’s AIoT ecosystem and long-term EV potential. The bull case rests on stabilization: If EV margins can find a floor and memory costs eventually ease, the technical oversold could fuel a sustained recovery.

The Buyback: A Stopgap, Not a Fix

Management has rolled out the largest share repurchase program in the company’s history, earmarking HK$20 billion for buybacks. So far, roughly 30 million shares have been bought back — barely 0.12% of outstanding equity. While the buyback may damp intraday volatility, it does nothing to address the fundamental question: Can Xiaomi protect margins on two fronts simultaneously?

The smartphone margin target is under attack from chip inflation, and the EV margin is squeezed by subsidy cuts and price competition. Until there is credible evidence that either problem is easing, the stock’s recovery will likely remain fragile.

What to Watch Next

Technicians note that the 50-day moving average sits around HK$3.06, representing roughly 15% upside from current levels. A close above that threshold would signal genuine buying interest. The downside marker is the recent low of HK$2.34 (€2.34), a level that could be retested if the next catalysts disappoint.

The most immediate catalyst is the second-quarter report, due later in the year. It will show whether Lu Weibing’s caution on EV margins is materializing or whether early countermeasures are already taking hold. Until then, Xiaomi remains a stock caught between a record buyback and a pair of margin traps that no share repurchase can solve.