Short Positions on Xiaomi (01810.HK) Surge 53% in a Week as Memory Price Spike Weighs on Sentiment

Goldman Sachs’ latest prime brokerage data show that hedge fund short positions against Xiaomi (01810.HK) increased by 53% over the past week. Flow data from the bank’s high‑frequency trading desk indicate that selling over the past two weeks was dominated by pension funds and hedge funds. As Xiaomi approaches the release of its third‑quarter results on November 18, market sentiment has shifted toward greater caution.

In a report published on Wednesday, November 5, Goldman’s market team reported that hedge funds regard Xiaomi as a near‑term consensus short or sell due to a paucity of catalysts. The team cited factory delays and weaker-than-expected market reception to recent EV promotions as contributors to the negative sentiment. Analysts Timothy Zhao, Ronald Keung and Eunice Liu subsequently reduced their 12‑month price target for Xiaomi from HK$66 to HK$56.5, a decline of more than 10%, attributing the cut to margin pressure from rising memory chip costs, a slowdown in AIoT growth, and delivery risks associated with delays at the second‑phase EV plant.

That assessment contrasts with the optimism seen earlier this year when Xiaomi’s EV strategy bolstered the share price. Since an early July peak, the stock has fallen by over 25%. Bloomberg consensus compiled estimates expect Xiaomi’s third‑quarter revenue to increase by 23% year‑over‑year.

Goldman’s trading outlook explicitly classifies Xiaomi as a short‑term consensus short. The underlying data support this view: in addition to the 53% surge in short interest in prime brokerage records, the bank’s high‑frequency trading desk observed net selling driven by institutional accounts over the prior two weeks.

Goldman’s research team examined the impact of rising memory prices on Xiaomi’s smartphone margins in depth. While increased memory costs are expected to exert downward pressure on gross margins, the analysts believe the hit will be less severe than during the 2021–2022 cycle, when smartphone gross margins declined by 4.7 percentage points. Offsetting factors include Xiaomi’s continued push into higher‑end models, product specification adjustments, and potential relief from favorable exchange‑rate movements. On that basis, Goldman projects smartphone gross margins to moderate to about 10% in 2026, down from roughly 11% in the second half of 2025, and trims its shipment forecast for 2026 to 173 million units, implying roughly 1% year‑over‑year growth.

A notable structural development is the shifting composition of Xiaomi’s profitability. Goldman expects AIoT and internet services to account for approximately 77% of core gross profit by 2026, substantially reducing the sensitivity of corporate earnings to smartphone margin volatility. As a result, the bank forecasts Xiaomi’s core net profit to remain roughly flat year‑over‑year in 2026, reflecting improved resilience.

With respect to AIoT, Goldman projects a moderation in growth due to high base effects in China, particularly within television categories where shipments have begun to decline year‑over‑year. Model outputs indicate AIoT revenue growth of 6% and 0% year‑over‑year in the third and fourth quarters of 2025, respectively, and 9% for full‑year 2026. The bank notes, however, that accelerated international expansion—illustrated by plans to open approximately 2,000 Xiaomi Stores globally by 2026—could allow overseas AIoT revenue growth to outpace domestic performance beginning in the third quarter of 2025.

Goldman also addressed investor concerns regarding Xiaomi’s electric‑vehicle business. The company’s offer of up to RMB 15,000 in purchase tax subsidies for 2026 deliveries is expected to have a financial impact of about RMB 3 billion in the first half of 2026, although the firm expects part of that effect to be offset by lower BOM costs and production efficiencies. The report recommends that investors monitor steady monthly increases in output rather than anticipate abrupt capacity jumps, noting that phased construction of the second‑phase plant has the facility currently in a measured ramp‑up. Delivery forecasts remain unchanged at 390,000 units for 2025 and 800,000 units for 2026.

Following its analysis, Goldman updated its valuation model and lowered the 12‑month target price to HK$56.5. The revision reflects a reduction in the EV/NOPAT multiple from 21x to 18x and a downward adjustment of the discounted‑cash‑flow valuation for Xiaomi’s automotive business from US$87 billion to US$80 billion. Revenue projections for 2025–2027 were trimmed by 2–4%, and adjusted net‑income estimates for 2026–2027 were reduced by 9–10%.

Despite these changes, Goldman retained a Buy rating, citing an attractive risk‑reward profile at current share levels. The report also identifies potential upside catalysts in Xiaomi’s investments in large language models and robotics, which would reinforce the company’s integrated “human‑car‑home” ecosystem narrative. Under Goldman’s scenarios, the bull‑case valuation stands at HK$67.4 (up 56% from the publication price), while the bear‑case valuation is HK$39.0 (down 10%).