Hedge Funds Target Xiaomi as Short Positions Surge Ahead of Earnings

A coordinated bearish assault is unfolding against Chinese technology giant Xiaomi, with hedge funds dramatically increasing their short positions just weeks before the company’s quarterly results announcement on November 18. According to Goldman Sachs data, short selling activity has skyrocketed by 53% within a single week, positioning Xiaomi as the market’s current “consensus short” target.

Institutional Investors Turn Bearish

The bearish sentiment has manifested in concrete trading activity. Pension funds and hedge funds have substantially expanded their short exposures over the past two weeks. Goldman Sachs has officially categorized Xiaomi as a near-term “consensus short” in its Prime Book, citing insufficient catalysts to drive a meaningful stock recovery.

This selling pressure has already taken its toll on Xiaomi’s valuation. From its June 2025 peak, the company’s shares have declined by approximately 30%, reflecting growing institutional skepticism.

Key concerns driving the pessimistic outlook:

• Safety concerns surrounding smart-driving features damaging brand reputation
• Construction delays at new manufacturing facilities hampering expansion plans
• Disappointing electric vehicle demand despite aggressive marketing efforts
• Compressed profit margins due to soaring memory chip costs
• Goldman Sachs reducing price targets by more than 10%

Core Smartphone Business Shows Signs of Stagnation

Xiaomi’s foundational smartphone division is displaying concerning signals. While the company shipped 43.4 million units globally during the third quarter and maintained its market share at 14%, year-over-year growth registered a meager 1%.

More troubling is the 2% shipment decline within Xiaomi’s domestic Chinese market, where the expiration of government subsidy programs appears to be impacting performance. Although Guosheng Securities notes some compensation through Asia-Pacific regional growth, questions remain about whether this expansion can sufficiently reassure investors.

Electric Vehicles: Potential Bright Spot Amid Challenges

Despite widespread skepticism, Xiaomi’s electric vehicle segment demonstrates surprising momentum. Third-quarter deliveries reached nearly 109,000 units, putting the annual target of 350,000 vehicles within realistic reach.

Should investors sell immediately? Or is it worth buying Xiaomi?

CITIC Securities offers an optimistic projection, suggesting that Xiaomi’s automotive and AI businesses could achieve profitability for the first time. With increasing production volumes and higher average selling prices, the EV division might transform from a financial burden into a profit contributor.

For the full quarter, CITIC anticipates revenue of 113.2 billion RMB, representing 22.3% year-over-year growth. Non-IFRS net profit is forecast to reach 10.2 billion RMB, which would constitute a substantial 63% increase.

Divided Analyst Sentiment Creates Market Uncertainty

The expert community remains deeply polarized in its assessment of Xiaomi’s prospects. While Goldman Sachs has cut price targets, CLSA maintains its “high-conviction outperform” rating with a target price of 69 HKD. Similarly, BofA Securities reduced its target from 69 to 57 HKD but continues to defend its “buy” recommendation, arguing that Xiaomi’s integrated ecosystem spanning smartphones, IoT devices, and electric vehicles remains undervalued.

With current valuation at approximately 23 times forward price-to-earnings, optimistic analysts see potential for upward movement. The stock’s significant discount to previous highs presents opportunity for bulls while confirming the thesis for bearish investors.

November 18: The Critical Test

With twelve days remaining until Xiaomi’s earnings disclosure, the upcoming report will determine whether hedge funds correctly positioned themselves against the company or whether bearish traders face an unpleasant surprise. Market participants will closely scrutinize EV margin performance and smartphone segment results.

The dramatic expansion of short positions reveals underlying market anxiety. However, such extreme positioning often creates a double-edged scenario—any positive earnings surprise could potentially trigger a short squeeze, forcing bearish investors to rapidly cover their positions.