I want to start with a judgment: Xiaomi’s profit recovery doesn’t necessarily have to wait for the end of this crazy AI wave, but it must wait until the rising slope of storage and smartphone component costs slows down, or until Xiaomi can offset these costs using higher ASP, less low-end inventory, and automotive scale profits. AI is not the only issue; AI is more like an amplifier for this round of storage price increases and capital expenditure.

Stock Price First Fell Due to Profit Doubts

I pulled adjusted daily data for 1810.HK from Yahoo Finance covering June 12, 2025, to June 11, 2026. During this period, Xiaomi dropped from HKD 52.20 to HKD 25.84, a decline of 50.5%. The peak for the range was HKD 60.15 on July 2, 2025. The latest price is exactly the low point of the range, representing a 57.0% pullback from the high.

There is noise in the capital side of things. The RMB has indeed appreciated over the past year; Yahoo Finance’s USDCNY=X dropped from 7.1928 to 6.7725, representing a decline of 5.84% for USD against RMB. HKD/RMB also fell from 0.9164 to 0.8643. When viewing Hong Kong stocks with RMB, the same HKD assets will appear more expensive, and southbound funds may experience currency exchange rate fluctuations and portfolio pacing in the short term.

But framing this as “RMB appreciation leads to decreased southbound capital, which causes Xiaomi to fall” is too convenient. HKEX’s Stock Connect 2025 Review shows that the average daily turnover for southbound funds in 2025 was HKD 121.1 billion, compared to HKD 48.2 billion in 2024; at the end of Q4 2025, southbound turnover accounted for 23.0% of Hong Kong cash stock turnover, which is higher than the 20.9% recorded at the end of Q4 2024. HKEX monthly data also shows that in the first five months of 2026, Hong Kong stocks averaged a daily turnover of HKD 275.3 billion, representing a year-on-year

A more direct explanation can be found in the income statement. Xiaomi’s full-year revenue in 2025 was 457.3 billion yuan, with smart EVs, AI, and other new businesses contributing 106.1 billion yuan in revenue. Operating profit for the entire year turned positive for the first time at 0.9 billion yuan, and they delivered 411,082 vehicles. Looking only at the full year, the narrative is not bad. However, by Q1 2026, the reported figures became tighter: revenue was 99.1 billion yuan, adjusted net profit was 6.1 billion yuan, a year-on-year decrease of approximately 43

The stock price drop isn’t due to “Xiaomi not making cars” or “Xiaomi lacking AI,” but rather because the market has started asking an old question again: Can Xiaomi truly protect its profit margins amid fierce hardware competition?

Several Headwinds Are Not the Same Kind of Pressure

The downside risks listed in the user prompt can be divided into three layers and should not be mixed together.

The first layer is valuation and capital discounting. US dollar liquidity, overseas capital risk appetite, and the overall trading rhythm of Hong Kong stocks all affect high-beta HK stocks like Xiaomi. The Fed’s balance sheet will still be around $6.7 trillion until June 2026, and the market continues to discuss smaller balance sheets and reserve requirements. Naturally, foreign capital will not provide infinite duration/support for growth stocks as it did during the low-interest rate era. However, this type of pressure is more related to a “valuation multiple” issue; it typically cuts P/E or P/S first, rather than directly changing how much money Xiaomi earns from a single phone.

The second layer is automotive subsidies and EV competition. For 2024-2025, new energy passenger vehicles will be exempt from purchase tax, with a single vehicle exemption cap of ¥30,000; for 2026-2027, this will change to half the rate, with a single vehicle tax reduction cap of ¥15,000. For vehicles priced between ¥200,000 and ¥300,000, this is no small amount. It will have two consequences: it will accelerate some demand before the end of 2025, and in 2026, car manufacturers must either absorb some price pressure or accept a slower order rhythm. Xiaomi Auto proved its ability to increase volume in 2025, but if it delivers 80,856 units in Q1 2026—a drop of 44.3% compared to 145,115 units in Q4 2025—the market will no longer solely focus on the “full-year target of 550,000 vehicles,” but will also monitor model switching and per-vehicle profit.

The third factor is mobile phone costs. This pressure is the strongest because it is already reflected in the gross profit margin. In Q4 2025, Xiaomi’s mobile phone gross profit margin dropped to 8.3%, and in Q1 2026, it was only 10.1%. During this period, phone shipments were 33.8 million units, marking a year-on-year decline of about 19%. However, the ASP actually rose to around 1,310 RMB. This indicates that Xiaomi is making an uncomfortable adjustment: reducing low-end and mid-low-end models that are under significant pressure, and moving towards higher price points. But even so, the gross margin continues to be eroded by cost and competition.

The role of AI here is a bit complex. Xiaomi itself plans to invest in AI, intelligent driving, and embodied intelligence. Caixin’s summary mentions an investment budget of 16 billion RMB for AI and embodied intelligence in 2026. The bigger issue is that global cloud vendors and server demands are drawing the capacity of DRAM, HBM, and NAND towards data centers, causing smartphones, PCs, and consumer SSDs to start queueing on the same capacity chart. Xiaomi is not paying solely for “doing AI for itself,” but rather contributing to the competitive bidding for the entire industry’s AI infrastructure.

How to Buy a Phone Amid Rising Storage Costs

Over the past two years, storage prices have not risen smoothly; rather, they first recovered and then saw an uncontrolled surge.

I kept HDD separate in the table because users asked about mechanical hard drives. However, it has no direct BOM impact on Xiaomi phones. HDD affects Xiaomi notebooks, NAS/ecosystem chain, cloud AI storage, and the entire consumer electronics price environment. What actually goes into Xiaomi phones are LPDDR4X/LPDDR5X and eMMC/UFS.

Taking several model types still displayed on the global product pages of the Xiaomi official website as an example, the cost pressures are roughly as follows:

This table is neither a disassembled BOM nor Xiaomi’s procurement contract. It merely performs a stress test using public specifications and industry price increase ranges. Actual procurement prices are influenced by long-term agreements, inventory cycles, vendor rebates, currency, model types, and delivery windows. However, even under conservative assumptions, the conclusion is clear: entry-level phones face increases of tens of yuan, mid-range phones an increase of around a hundred yuan, and high-end phones several hundred yuan. This is no small matter for a company that relies on scale and high cost-performance to ship products.

This also explains why it is impossible for Xiaomi to simply pass on every cost increase through price hikes to consumers. For a volume model like the Redmi 14C, raising the price

Focus on the Substance, Not the Slogans

Therefore, Xiaomi’s profit recovery does not need to wait for AI to completely fade away. There are three more realistic trigger points.

The first point is the slowdown in the slope of storage prices. As long as DRAM and NAND maintain their rhythm of quarterly explosive growth (like observed in Q1 or Q2), mobile phone gross margins will struggle to be sustainable. Even if prices do not return to 2024 lows, as long as the rate of increase drops from “near quarterly doubling” to a normal cycle price hike, Xiaomi can gradually repair its position through inventory management, product mix adjustments, and pricing strategies.

The second point addresses whether raising the mobile ASP (Average Selling Price) has negatively impacted sales volume. A contradiction observed in Q1 2026 is that while the ASP reached a new high, shipments saw a year-on-year decline of approximately 19%. If the company merely increases prices to maintain gross profit margins going forward, stock prices may not react positively; only if Xiaomi can stabilize the ASP using both high-end and core mid-range models, while simultaneously narrowing the decline in overall shipments, will the market revalue the mobile business.

The third point is whether the automotive business can once again prove its scale profitability. Throughout 2025, EV, AI, and other new businesses achieved positive operating profits, but Q1 2026 incurred a loss of 3.1 billion RMB. This may not necessarily be a bad thing; model transitions, production pacing, and pricing strategies can all cause quarterly fluctuations. The key issue is that after the subsidies taper in 2026, Xiaomi must prove that the YU7/SU7 are not solely reliant on order hype, but can maintain gross margins and deliveries even in a more normal subsidy environment.

Regarding the stock price movement, the vicinity of HK$25 is already the low point from the past year, and the technical structure remains weak. My baseline judgment is that without new evidence of profit repair, the short term is more likely a weak rebound within the HK$25–32 range; if HK$25 breaks down, the market will look for the next layer of support in the HK$22–24 range; and only if subsequent financial reports confirm that phone gross margins have stabilized and auto deliveries reach a new plateau should we first watch HK$32 before having an opportunity to challenge the HK$35–40 region. This range is not a buy/sell recommendation, but merely an observational framework based on combining current profit pressure and the price distribution over the past year.

I am rather reluctant to base my judgment solely on the premise of “waiting for the AI frenzy to end.” If the AI boom completely fades, storage prices might moderate, but Xiaomi’s narratives around its cars, mobile AI, intelligent driving, and high-end devices will also lose some valuation elasticity. A better state for Xiaomi is not the bursting of the AI bubble, but rather the transition of AI infrastructure from a panic buying stage to a stable procurement phase, thereby preventing storage prices from rewriting the hardware ledger on a quarterly basis.

References

• Yahoo Finance: Xiaomi Corporation 1810.HK Historical Data
• Yahoo Finance: USD/CNY Historical Data
• Xiaomi 2025 Annual Report
• Xiaomi 2025 Annual Results Announcement
• The Edge Malaysia: China’s Xiaomi 1Q profit sinks 43% on higher memory chip costs
• Caixin Global: Xiaomi Profit Drops 43% as Memory Costs and EV Transition Weigh on Growth
• HKEX Insight: Stock Connect 2025 Review
• [HKEX Monthly Market Highlights](https://www.hkex.com.hk/Market-Data/Statistics

Writing Notes/Epilogue

Original Prompt

$blog-writer Xiaomi's stock price faces multiple headwinds: the appreciation of the RMB caused major Southbound funds to reduce investments in Hong Kong; tightening USD liquidity also reduced foreign investment capital. Furthermore, electric vehicle subsidies are expiring, national subsidies are tapering off, and AI continues to burn money. Storage chip prices rising, coupled with AI hype, leads to continuously increasing semiconductor prices. Will Xiaomi's profit recovery only occur after the current AI frenzy completely subsides? Compile and analyze the contents I mentioned earlier, gathering Xiaomi's stock price data from the past year to predict its subsequent trend. Regarding semiconductor price increases, compile the annual inflation rates for Solid State Drives (SSDs), Hard Disk Drives (HDDs), and memory over the past two years, and look up Xiaomi's popular models to assess how much the machine's hardware costs have increased.

Summary of Conceptual Ideas

This article retains the several themes proposed by the user: funds, subsidies, AI, storage, and stock prices, but removes the phrasing that every downside risk develops equally. RMB appreciation and Southbound funds are downgraded to funding rhythm factors because HKEX data does not support portraying the entire southbound flow as distinctly shrinking. Storage price increases and mobile phone gross profit margins are stronger main themes, so the body text allocates more space to cost breakdown analysis.

The cost estimation only provides a range, not a specific Xiaomi purchase price. The actual purchasing price requires information such as contracts, inventory levels, suppliers, and delivery windows, which cannot be confirmed using public materials.