Xiaomi’s stock spirals to the bottom of Hang Seng Tech Index amid 30% dip since September

Xiaomi is getting hammered. The company’s shares in Hong Kong have plunged almost 30% since September, wiping out months of gains and leaving it at the very bottom of the Hang Seng Tech Index.

The selloff comes as investors brace for earnings out Tuesday, expected to reveal the weakest revenue growth Xiaomi’s seen since 2023, according to Bloomberg.

The brutal drawdown follows rising doubts around Xiaomi’s two biggest bets: phones and electric vehicles.

Analysts have been cutting their price targets, short sellers are back in force, and hedge funds are increasing bearish positions on growing concerns over factory delays, safety risks, and low EV demand, despite Xiaomi throwing out new promotions.

Goldman Sachs says short interest in the company’s Hong Kong-listed shares is creeping back toward 0.7% of free float, up from 0.4% in July.

Phone margins fall as chips get pricier and iPhone 17 dominates

Smartphones are dragging Xiaomi down fast. Monthly contract prices for mobile DRAM chips surged 21% in October, the highest since July 2022, and that’s just the beginning. HSBC says another 10% jump is coming in the next quarter.

Those chips are a big chunk of what makes phones run, and they’re now eating into profit margins.

Gokul Hariharan, an analyst at JPMorgan, said, “We are still in the midst of pretty much a supercycle in memory… there will be pressure on margins because you can’t pass on all of these costs to consumers.”

And that’s the thing. Chinese shoppers aren’t spending much, and Apple’s iPhone 17 is flying off the shelves. Xiaomi can’t just raise prices, which means it’s taking the hit.

On top of that, mainland demand isn’t bouncing back. While Xiaomi used to ride China’s consumption wave, this year it’s getting crushed by it. And analysts aren’t optimistic.

The average price target for the stock has been cut by more than 8% since August. That’s the third-sharpest cut among tech peers on the index, only behind Meituan and Li Auto. Even with 47 buy ratings, sentiment is getting shaky.

EV delivery struggles and subsidy losses add pressure

Xiaomi’s EV push isn’t helping much either. Co-founder Lei Jun says the auto division aims to be profitable this year. But there’s skepticism growing over whether it can actually deliver enough vehicles to make a dent.

Fund manager Xin-Yao Ng from Aberdeen said, “There are concerns that auto delivery and thus revenue might not be as great as some investors might have hoped for.”

Adding to the problem, local government trade-in subsidies are ending, which is a blow to the entire EV sector. That’s left Xiaomi scrambling to boost output in a tough market with less help and more competition.

Even with growing deliveries, the runway to actual profit looks a lot longer now than it did earlier this year.

Meanwhile, the company’s Internet-of-Things business, which saw a boost last year from government programs, is now cooling off. Jiong Shao and the Barclays team said the IoT unit’s revenue will likely slip from last year’s highs. The temporary surge from subsidies is gone, and nothing’s stepping up to replace it.

What’s left is a cheaper stock. Xiaomi now trades at 19 times forward earnings, which is half what it was earlier this year. That’s attracted mainland investors who’ve been buying for 13 straight days through the stock connect program. But cheap isn’t the same as confident.

The hype that once carried Xiaomi to the top of Chinese tech has collapsed. Between rising costs, slumping margins, weak EV traction, and an economy that’s still shaky, Xiaomi’s market value is getting punished, and no quick fix is in sight.

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