Xiaomi Positioned to Lead China's AI Home Appliance Market, Morgan Stanley Says

Xiaomi is well-positioned to become a leading beneficiary of the expanding market for AI-powered home appliances in China, according to a new report from Morgan Stanley. The investment bank reiterated its Overweight rating and HK$45 price target on the company, citing its comprehensive AI ecosystem and leadership in the smart home sector as key drivers for long-term growth.

Ecosystem and Market Growth

Morgan Stanley's bullish outlook is anchored in the expected growth of China's AI home appliance market, which the firm projects will expand from approximately $123 billion today to about $150 billion by 2030. Analysts believe Xiaomi is uniquely equipped to capture this growth due to its integrated portfolio of smartphones, wearables, televisions, appliances, and electric vehicles, all connected through its HyperOS platform.

This interconnected ecosystem is central to the company's "Human + Car + Home" strategy, which aims to create synergies across devices and a seamless user experience. The bank forecasts that Xiaomi’s domestic revenue from AI home appliances could surpass RMB200 billion by 2035, with the potential for overseas revenue to be even greater.

Competitive Advantages

A key competitive advantage for Xiaomi is its vast and growing global user base, with more than one billion connected devices currently in operation, according to the report. This large installed base provides significant opportunities to cross-sell new products and deepen customer engagement.

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Furthermore, Morgan Stanley argues that the market currently underestimates Xiaomi's investments in artificial intelligence. The company's ongoing development of proprietary large language models (LLMs) and AI agents is expected to become a more significant valuation driver, supporting product differentiation, premium pricing, and improved profitability as earnings growth accelerates through 2027 and 2028.

Near-Term Headwinds

The report also addressed near-term investor concerns, particularly regarding rising memory chip costs. Morgan Stanley analysts view this as a manageable headwind, noting that Xiaomi's management has already outlined countermeasures.

These measures include selective price increases and improvements to the product mix. The firm expects these cost pressures to ease during the second half of 2026.