Memory Chip Crisis Hits Xiaomi Where It Hurts: Core Profits Halved as EV Losses Pile Up
Published on 06/27/2026 at 15:32 | Redaktion boerse-global.de
Xiaomi is caught in the grip of a structural cost shock that no buyback or product launch can cure. The stock has plunged 45% since the start of the year, hitting a 52-week low of €2.34 this week, and the fundamentals keep worsening. At the heart of the problem lies an unprecedented surge in memory chip prices — the consequence of an AI boom that has diverted production away from the consumer electronics components Xiaomi relies on.
The numbers are brutal. In the first quarter of 2026, Xiaomi’s adjusted net profit fell 43% to 6.1 billion yuan, missing analyst expectations of 6.4 billion yuan. Smartphone shipments dropped 19.2% year-on-year to 33.8 million units — the steepest decline among the world’s top five handset makers. The pain is self-reinforcing: as memory costs climb, Xiaomi, which sells mostly budget devices under $200, struggles to pass on higher component prices to price-sensitive buyers.
Company president Lu Weibing has quantified the cost explosion: memory prices have risen fivefold since the third quarter of 2025, and prices for TV display storage have surged tenfold. Counterpoint Research expects the shortage to persist at least through the end of 2027. CEO Lei Jun warned that margin pressure will last for another two years. The only major memory producers — Samsung, SK Hynix and Micron — have shifted capacity toward high-bandwidth memory and AI chips, leaving standard DRAM in short supply.
Xiaomi’s fledgling electric vehicle division adds to the financial strain. The EV business generated 19.9 billion yuan in revenue in the first quarter but posted an operating loss of 3.1 billion yuan — equivalent to roughly $5,600 per vehicle delivered. The company targets 550,000 EV deliveries for 2026, but by the end of May only 150,317 units had been handed over. Meeting the annual goal would require monthly deliveries of around 57,500 vehicles from June through December, a 15% jump above the previous record of 50,000.
Should investors sell immediately? Or is it worth buying Xiaomi?
The management is fighting back with a HK$20 billion share buyback program launched on June 2. On June 11 alone, it repurchased 7.8 million shares — yet the stock still closed at its 52-week low that day. Short sellers now hold roughly 9% of the free float, and the market remains unconvinced. A technical reading of the relative strength index at 19.8 points to extreme oversold conditions, but that alone offers no guarantee of a rebound.
Analyst opinion is sharply divided. Goldman Sachs expects second-quarter adjusted net profit to come in at 5.4 billion yuan, roughly half the year-earlier level, and has cut its full-year earnings estimate by 12% to 32.8 billion yuan. Still, the bank maintains a buy rating with a HK$40 price target, betting on a turnaround from the third quarter. Jefferies, by contrast, downgraded the stock to underperform with a target of HK$25.49, warning that rising memory costs will continue to squeeze both margins and shipments.
Despite the earnings weakness, Xiaomi is spending heavily on the future. Research and development outlays rose 33.4% to 9.0 billion yuan in the first quarter, and the company plans to invest 60 billion renminbi in artificial intelligence over the next three years, with about 16 billion renminbi allocated for 2026 alone. The new HyperOS 4 operating system is expected to launch in China in July or August.
Xiaomi at a turning point? This analysis reveals what investors need to know now.
The next major catalyst is the second-quarter earnings release on August 26. If Goldman’s forecast proves accurate, the stock will face another stress test. Meanwhile, the market’s focus is on June EV delivery numbers due in the first week of July — data that could either trigger a technical bounce or deepen the selling. With memory chip costs dictating the narrative, the buyback alone looks unlikely to reverse the downward momentum anytime soon.
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