Xiaomi’s €8.7 Billion AI Pledge Can’t Mask the Pain of a Memory-Driven Profit Collapse
Published on 06/25/2026 at 04:51 | Redaktion boerse-global.de
The very trend that has lifted tech markets—insatiable demand for artificial intelligence infrastructure—is wreaking havoc on Xiaomi’s core smartphone business. Operators of AI data centres are hoarding high-bandwidth memory chips, driving up component prices and squeezing margins for consumer electronics makers. For Xiaomi, the irony is particularly painful: the company is pouring €8.7 billion into its own AI ambitions, even as AI-fuelled memory costs hammer its bottom line.
Shares in the Chinese technology group have been pushed to the brink of their 52-week low, trading at €2.61 on Tuesday after a modest 2.64% bounce failed to alter the deeply oversold picture. The stock has lost roughly 42% of its value since the start of the year. The relative strength index stands at 22.2, signalling extreme oversold conditions. Short sellers now hold 9% of the free float, betting that more pain lies ahead.
The damage is concentrated in Xiaomi’s smartphone division, which accounts for the bulk of group revenue. In the first quarter, adjusted net profit collapsed by 43% to 6.07 billion yuan. Goldman Sachs forecasts a second-quarter decline of as much as 50%. Revenue fell 11% year on year to 99.1 billion yuan—its first quarterly drop in nearly three years and a miss against analyst expectations.
Memory chip contract prices for smartphones have surged, and for televisions the cost increases have been tenfold, according to CEO Lei Jun, who warned that the pricing pressure will persist for at least two more years. Xiaomi’s product mix makes it especially vulnerable: 62% of its handsets sell for under $200, leaving little room to absorb higher component costs. The company raised prices on selected models by as much as 30%, but customers balked and sales slid. Smartphone revenue dropped to 44.3 billion yuan, while the division’s gross margin slumped to just 10.1%. Rivals Apple and Huawei held their pricing steady and gained market share in the process. Overall smartphone shipments fell 19% to 33.8 million units in the first quarter—the steepest decline among the top five vendors.
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The pain extends beyond handsets. Xiaomi’s connected-home-appliance segment tumbled roughly 24% as government subsidy programmes expired, adding another drag on group performance.
Meanwhile, the electric vehicle business that Lei Jun has championed as a growth driver is bleeding cash. The EV unit generated 19.9 billion yuan in first-quarter revenue but posted an operating loss of 3.1 billion yuan. That works out to a loss of approximately $5,600 per vehicle delivered. Xiaomi had set an ambitious full-year delivery target of 550,000 cars, but by the end of May it had only handed over about 150,000 units. Jefferies has already slashed its forecast to 495,000, and the company would need to set monthly delivery records from now until December to hit its own goal.
Management has tried to stem the share slide with a HK$20 billion buyback programme. Since the start of June, Xiaomi has repurchased roughly 30 million shares. The market has largely ignored the effort, and the stock remains within striking distance of its 52-week low of €2.51.
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In a bid to reposition for the long term, Xiaomi has committed at least $8.7 billion to artificial intelligence over the next three years. It recently released MiMo Code, an AI coding assistant, and has been rolling out large language models at a rapid clip: the MiMo family began taking shape in April 2025, followed by the massive MiMo V2 Pro model in March 2026, and then the latest flagship series. The new HyperOS 4 software is due to debut in late summer, and the Xiaomi 18 Pro models are set for a European launch at the end of September.
Yet none of these initiatives address the immediate crisis. Counterpoint Research expects the memory chip shortage to persist until at least the end of 2027. Until component costs ease, the stock lacks a clear operational catalyst for a sustained turnaround. Xiaomi’s full second-quarter report is due on 26 August, when the board must convince investors that the margin erosion can be halted—or risk a break below that critical 52-week floor.
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