Xiaomi’s $1.4 Billion AI Infrastructure Push Meets a 130% Memory-Chip Squeeze and Tepid Stock Recovery
Published on 07/05/2026 at 20:13 | Redaktion boerse-global.de
Xiaomi has dramatically escalated its bet on artificial intelligence, raising the budget for graphics processing units at cloud partner Kingsoft Cloud from roughly 4 billion yuan ($550 million) to over 10 billion yuan ($1.4 billion). The move reflects a shift in scale from 10,000-GPU clusters to systems described as “superlative” in size, requiring Kingsoft Cloud to accelerate its infrastructure expansion. Industry observers now estimate that Kingsoft Cloud could eventually purchase AI hardware worth more than 40 billion yuan from Xiaomi, with total procurement over the next two years potentially exceeding 100 billion yuan.
The stock inched up 3.31% on Friday to €2.65, trimming the weekly gain to 7.77%. Yet that headline recovery masks a grim broader picture. The shares remain 59.29% below the 52-week high of €6.51 hit in September 2025, having fallen to a low of €2.34 on 26 June. The year-to-date decline stands at 40.98%, while the 12-month loss is a painful 57.83%. A relative strength index of 40.5 shows the stock has climbed out of oversold territory, but the annualised volatility of 34.72% signals continued jitters.
The budget hike is part of a longer-term strategy. In February, Goldman Sachs analysts had forecast that Xiaomi would invest around 10 billion yuan in AI by 2026 alone. The latest allocation already matches or surpasses that figure, and slots into Xiaomi’s previously announced capital expenditure plan of 60 billion yuan over three years. The goal is to embed AI deeply into its ecosystem of smartphones, smart-home devices and electric vehicles. For now, those funds are flowing into data centres rather than immediately profitable operations, widening the gap between investment and earnings visibility.
Should investors sell immediately? Or is it worth buying Xiaomi?
On the EV front, the picture is more encouraging. Xiaomi delivered more than 30,000 electric vehicles for the third consecutive month in June, bringing first-half 2026 deliveries to nearly 180,000 units. The full-year target of 550,000 vehicles remains ambitious, but within reach if production ramps up significantly in the second half. To sustain demand for the flagship SU7, Xiaomi launched a financing scheme dubbed “Easy Pay” on 1 July, requiring a down payment of 49,900 yuan followed by low monthly instalments and annual balloon payments. Analysts see it as a direct response to the brutal price war in China’s EV market.
Meanwhile, the smartphone business faces a different kind of shock. Market researcher Gartner expects DRAM memory-chip prices to surge by as much as 130% by the end of 2026, compressing margins in Xiaomi’s core handset division. Jefferies struck a sceptical tone, pointing to the combination of rising component costs and ongoing start-up losses in EV production. Citi, however, maintained a buy rating with a target price of HK$37, betting that Xiaomi can pass on some of the cost increases through a premium-tier strategy and new models such as the upcoming YU7 series.
Technically, the stock has recovered 13.2% from the 26 June low of €2.34, but the 200-day moving average of €3.97 still sits a long way above current levels. Traders will watch the €2.70 mark in the coming week; a sustained break above that would strengthen the short-term uptrend. Beyond price action, the market is awaiting details of Xiaomi’s planned Europe expansion in 2027 and any new AI-centric smart-home products that could reignite growth.
The company is thus caught between two powerful forces: a costly commitment to AI infrastructure and the need to navigate a memory-chip price spike while scaling its EV business. The €2.65 share price suggests investors are not yet buying into the narrative that the billions spent today will pay off tomorrow.
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