Bad news for Xiaomi

Xiaomi's stock plummeted amid disappointing revenue. Photo: Bloomberg .

After a period of strong growth at the beginning of the year, Xiaomi's stock is among the worst-performing tech companies in China in just the past few months. Many experts attribute the decline to the gloomy outlook for the smartphone and electric vehicle markets, two core business areas of this tech giant.

Analysts predict that Xiaomi's financial report, to be released later on November 18th, will show the slowest revenue growth since 2023. This has fueled pessimism, leading to increased short selling activity. Many analytical firms have adjusted their price targets for the stock due to a weakening assessment of the profit outlook.

One of the biggest pressures on Xiaomi is the rising cost of memory chips. According to InSpectrum Tech, mobile DRAM contract prices in October rose 21%, reaching their highest level since July 2022. HSBC forecasts prices could increase by another 10% in the third quarter of 2025. This directly threatens the profit margins of the smartphone segment, which is a pillar of revenue for the tech giant.

Gokul Hariharan, an expert at JPMorgan Chase, believes the market is in the "midst of a supercycle" for the semiconductor chip industry. He argues that Xiaomi will find it difficult to pass all the increased costs on to consumers given the slowdown in purchasing power in China and the strong sales of Apple's iPhone 17.

In the electric vehicle segment, Xiaomi is increasing production capacity to meet pre-orders. Co-founder Lei Jun previously stated that this division aims to achieve profitability this year. However, the Chinese automotive market is under significant pressure as many local governments are scaling back trade-in programs. According to Barclays, revenue from Xiaomi's IoT segment is also projected to slow compared to last year's strong growth due to the loss of subsidies.

"The sharp increase in chip costs could continue in the near future," said Xin-Yao Ng, fund manager at Aberdeen Investments. He also suggested that the overall difficulties in the electric vehicle industry have contributed to Xiaomi's lower-than-expected actual revenue.

The surge in market capitalization that propelled Xiaomi to $200 billion in June has also quickly stalled. Shares listed in Hong Kong are now down nearly 30% from their September peak, becoming the biggest loser in the Hang Seng Tech index during the same period.

Concerns about China's economic outlook and fierce price competition in the consumer market continue to weigh on investor sentiment. The short-selling ratio in Hong Kong has risen to 0.7% of the total free-floating shares.

Goldman Sachs says hedge funds are betting on risks related to product safety, factory progress, and demand for electric vehicles, despite Xiaomi's promotional campaigns.