Hedge Funds Increase Short Positions on Xiaomi Ahead of Earnings, Goldman Sachs Reports

Hedge funds have turned bearish on Xiaomi and are likely to maintain short positions through the earnings season, according to Goldman Sachs.

Goldman Sachs reported that short positions on Xiaomi stock held by its prime brokerage clients surged 53% over the past week. The company is scheduled to release its third-quarter results on November 18.

Institutional trading over the past two weeks has skewed heavily toward selling, with pension funds and hedge funds leading the selloff, the investment bank noted in a report released Wednesday.

Feedback from hedge funds indicates Xiaomi has become a consensus short-selling target, at least in the near term. Goldman Sachs cited several factors weighing on sentiment, including a lack of catalysts, security concerns, factory delays, and weak demand for electric vehicles despite ongoing promotional campaigns.

The firm's analysts have also lowered their price target for Xiaomi by more than 10%, pointing to margin pressures from rising internal chip costs.

Despite the bearish positioning, Xiaomi is expected to report a 23% year-on-year revenue increase for the third quarter when it announces results next week.

The increased short interest reflects broader concerns about the Chinese technology company's near-term prospects, even as it continues to expand its smartphone and electric vehicle businesses. The combination of operational challenges and margin pressures has prompted investors to adopt a more cautious stance ahead of the earnings report.