Xiaomi Wields Recycling Technology and a $1.4 Billion AI Budget to Counter Margin Pressures
Published on 07/03/2026 at 20:24 | Redaktion boerse-global.de
A rare double-dose of positive news briefly lifted Xiaomi’s stock on Friday, as the Chinese tech conglomerate unveiled a manufacturing breakthrough in green materials and more than doubled its artificial intelligence spending. Yet the 2.54% bounce that carried the shares to €2.65 remains a shallow rebound from the depths of a punishing sell-off. After hitting a 52-week low of €2.34 on 26 June, the stock has clawed back roughly 13%, but it still trades 41% below the level of a year ago and more than 60% below the September 2025 record.
The centrepiece of the day’s announcements was “Titan Alloy 2.0”, a proprietary aluminium alloy that uses 100% recycled material for the die-cast rear floor of Xiaomi’s electric vehicles. The company claims to be the first in China to deploy the technique in mass production, with the SU7 and YU7 already rolling off the line using the material. According to the Swedish Environmental Research Institute IVL, the switch cuts carbon emissions by roughly 93% compared with primary aluminium, bringing the footprint to just 1.1 kgCO?e per kilogramme of material. Xiaomi estimates each vehicle saves about 800 kg of CO?, and with a production target of 550,000 units for 2026 the annual reduction would hit approximately 450,000 tonnes – a meaningful improvement for the environmental credentials of its young auto division.
That green narrative was paired with an escalation in the company’s artificial intelligence ambitions. Xiaomi has raised its budget for GPU procurement with partner Kingsoft Cloud from an original 4 billion yuan to more than 10 billion yuan, equivalent to roughly US$1.4 billion. Kingsoft Cloud itself plans capital expenditure of 15 billion yuan in 2026, with Xiaomi as one of the largest customers. Under the financing model, Xiaomi pays 20-30% of the cost upfront, with bank loans covering the remainder. Industry sources point to an even larger figure: total procurement could surpass 100 billion yuan over the next two years, signalling a sharp acceleration of the group’s AI strategy.
The twin announcements come at a moment when investor confidence has been battered by two simultaneous margin headwinds. On the automotive side, company president Lu Weibing has acknowledged that the electric-vehicle gross margin is unlikely to exceed the 2025 level this year, as government purchase-tax incentives are set to halve, forcing automakers to offer their own subsidies. The EV division slipped back into an operating loss of 3.1 billion yuan in the first quarter of 2026, with gross margin narrowing to 20.1%. Meanwhile, a recall affecting 116,887 SU7 units for driver-assistance software tweaks added to the operational noise.
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On the smartphone side, a surge in memory-chip costs – up roughly 100% year-on-year, according to market observers – is forcing a second wave of price increases on handsets, ranging from 200 to 800 yuan per device. The margin squeeze has already drawn the attention of regulators: on the same Friday, a delegation from the price-monitoring centre of China’s National Development and Reform Commission visited Xiaomi to review pricing practices in both its EV and smartphone businesses.
Analyst opinion remains sharply divided. Goldman Sachs trimmed its price target but maintained a buy recommendation, citing a sum-of-the-parts valuation that sees value beyond the current margin compression. Jefferies, by contrast, downgraded the stock from hold to underperform, pointing to the weak first-quarter operating result and the persistent memory-cost inflation that makes smartphone margin targets harder to achieve.
On a technical basis, the stock’s relative strength index has climbed to 40.0 from deeply oversold territory, after briefly dipping to 36.1 during the worst of the slide. The 50-day moving average sits at €3.06 – the first meaningful resistance level if the recovery gains traction. The 200-day average at €3.97, however, remains a distant mark. A record share buyback programme is running in the background, which should provide some cushion against further sharp declines, but it does nothing to resolve the fundamental questions around margin stability.
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The next major catalyst is the second-quarter earnings report, due later in the year. It will show whether Lu Weibing’s cautious margin outlook is materialising – or whether cost-control measures and the scale-up of EV deliveries to 550,000 units can reverse the trend. Until then, the stock is caught between a green manufacturing coup and a $1.4 billion AI bet on one side, and the brute force of a price war, subsidy withdrawal and chip inflation on the other.
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