For Xiaomi, the Memory-Chip Hangover Outweighs the EV Buzz

Xiaomi shares clawed back 7.77% last week, closing Friday at €2.65 for a daily gain of 3.31%. Yet the bounce does little to alter the grim scorecard: the stock still trades 40.98% below where it started the year and has shed nearly 58% over the past twelve months. The rally looks more like a technical pause than a trend reversal, and the culprit is clear: memory-chip costs that are spiralling far faster than Xiaomi’s electric-vehicle ambitions can offset.

The company’s smartphone segment, still its core profit engine, is haemorrhaging margin. First-quarter revenue from handsets fell 12.5% to 44.3 billion yuan, while unit sales dropped 19% to 33.8 million — the steepest decline among the world’s top five manufacturers. Gross margin in the division shrank to 10.1% from 12.4% a year earlier. The reason, according to company president Lu Weibing, is that contract prices for memory chips used in smartphones have roughly quintupled since the third quarter of 2025. For television sets, the increase is nearly tenfold. Samsung, SK Hynix and Micron have shifted production capacity toward AI data centres, squeezing supply for consumer electronics.

Counterpoint Research sees no relief before the end of 2027, and chairman Lei Jun has warned investors that the cost pressure could persist for another two years. The hit to earnings has been brutal: first-quarter net income tumbled 57% to 4.72 billion yuan on total revenue of 99.14 billion yuan, down 11% year on year.

Xiaomi’s response has been twofold: premiumise handsets and scale up electric vehicles. The average selling price of its smartphones rose to a record 1,310 yuan in the quarter, a sign that the shift toward higher-margin models is gaining traction even as volumes shrink. On the EV front, the automotive and AI unit generated 19.9 billion yuan in quarterly sales, roughly 20% of group revenue, and surprised with a 20.1% gross margin. But high start-up costs left the division with an operating loss of 3.1 billion yuan, and the business remains cash-flow negative. The YU7 GT sport utility vehicle set a lap record at the Nürburgring for electric SUVs, burnishing the brand’s tech credentials, and deliveries reached 80,856 units in the first quarter. The full-year target stands at 550,000 vehicles.

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

To steady the stock, Xiaomi launched a new buyback programme worth up to 20 billion Hong Kong dollars on 2 June, running for twelve months. It replaces an earlier scheme under which the company repurchased roughly 399.6 million Class B shares for about 14.6 billion Hong Kong dollars. Management insists the balance sheet can handle the expanded programme. Yet the shares still plumbed a 52-week low of €2.34 on 26 June, just 13.2% below the current price. The 50-day moving average sits at €3.06 — 13.5% above Friday’s close — while the 200-day average at €3.97 represents a 33.24% gap.

The RSI, at 40.5, has eased from oversold territory but gives no all-clear signal. Annualised volatility of 34.72% suggests sharp swings in both directions remain possible. The main risk is that the buyback becomes a holding action rather than a catalyst. If memory-chip costs keep rising or EV losses widen further, the share price could easily retest the June low.

Short-term direction hinges on monthly EV delivery data and any fresh colour on component pricing. A sustained push above the 50-day average would offer a genuine technical buy signal. The next hard catalyst will be the second-quarter results, due in the third quarter. Until then, Xiaomi is caught between two forces: a memory-chip cost crisis that is squeezing its most profitable business, and an EV ramp that is not yet big enough to fill the gap. The recent weekly gain buys time, but it does not solve the equation.