Xiaomi's Two-Front War: Surging Memory Prices and EV Cash Burn Drive Stock to 52-Week Low

Xiaomi’s shares hit a fresh 52-week low of HK$2.48 on Thursday, deepening a 45% year-to-date rout that has wiped billions from the Chinese tech giant’s market value. The slide persists despite the company’s largest-ever share buyback programme, a HK$20 billion effort that has so far failed to stem the selling pressure. Short sellers now control roughly 9% of the free float, betting on further declines, while the relative strength index has sunk to 20, deep into oversold territory.

At the heart of the sell-off lies a painful margin squeeze in Xiaomi’s core smartphone business. Memory chip prices surged up to 90% in the first quarter, with procurement costs for standard components nearly quadrupling, according to president Lu Weibing. The company is absorbing these increases rather than passing them to consumers — a strategy that reflects its heavy reliance on the budget segment. Jefferies estimates that 62% of Xiaomi’s handsets sell for less than $200. The result: smartphone gross margins slumped from 12.4% to 10.1% in the first quarter, dragging group net profit down 57% to 4.72 billion yuan.

The pain is compounded by Xiaomi’s electric vehicle division, which is burning cash at an alarming rate. While EV revenue reached nearly 20 billion yuan in the first quarter, the segment booked an operating loss of 3.1 billion yuan — equivalent to roughly $5,600 lost on every car delivered. Through May, the company shipped just 150,000 vehicles, a far cry from its ambitious annual target of 550,000 units. Jefferies has already slashed its full-year forecast to 495,000, and reaching even that lower bar would require monthly production of 57,500 cars — 15% above the current record of 50,000.

Should investors sell immediately? Or is it worth buying Xiaomi?

Analysts are growing increasingly bearish. Jefferies downgraded the stock to “underperform,” while Goldman Sachs expects adjusted net profit to halve to 5.4 billion yuan in the second quarter. The U.S. bank also trimmed its earnings-per-share estimates for the next three years by up to 6%. Management is fighting back with a sweeping software overhaul. HyperOS 4, built from scratch in Rust and Flutter, will launch in China by August and roll out globally from October. The aim is to boost profitability by reducing memory bloat and improving system security — but the operating system won’t be ready for months.

Meanwhile, Xiaomi is pouring 40 billion yuan into research and development this year, including heavy investment in its EV production ramp. The buyback programme, which began in early June and allows the company to repurchase up to 10% of outstanding shares, has already scooped up 30 million shares. Yet the stock continues to drift lower, underscoring the depth of investor scepticism.

The next big inflection points come in July, when Xiaomi reports monthly EV delivery figures, and on August 26, when second-quarter earnings are due. Until then, the market is left to weigh a record buyback and an ambitious software play against the cold reality of rising memory costs and an electric vehicle business that is still bleeding red ink.

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