Allbirds pivots from footwear to AI infrastructure, shares surge 580%

Allbirds, the San Francisco-based footwear company, announced it's pivoting from shoes to artificial intelligence infrastructure. The company struck a $50 million deal to become an "AI compute infrastructure" business and will change its name to NewBird AI.

Following the announcement, Allbirds' shares surged by more than 580% on Wednesday. However, the company's stock market value remains more than 90% lower than when it was first listed in 2021. Before the AI pivot announcement, the stock had plummeted from a high of more than $500 per share to around $2.50.

NewBird AI will purchase advanced graphic processing units (GPUs) - computer chips that power AI. The company identified a "gap in the market" where many businesses lack sufficient computing power due to industry demand outpacing supply. Their long-term plan involves offering on-demand graphics chips and cloud services specifically built for AI applications.

The Allbirds brand will be owned by fashion conglomerate American Exchange Group, which includes brands like Ecko Unltd and Aerosoles, following a $39 million deal announced in March. Allbirds chief executive Joe Vernachio stated the move will allow the company to "thrive in the years ahead."

Branding consultant Wei Kan from Conduit Asia described the move as more of a "liquidation" than a pivot, using the stock market shell of the shoe brand to enter an unrelated business. Retail analyst Hitha Herzog noted the excitement over Allbirds "just by putting AI in an announcement" makes it "clearly a meme stock," referencing the meme stock phenomenon that gained prominence during the COVID-19 pandemic.

Herzog added there is "certainly AI mania that is going on," given the lack of proof of product or earnings from the company related to its new business. Kan pointed out that while the announcement gives NewBird AI a shell to trade on, "a stock going from $3 to $17 on a press release doesn't restore $4bn in destroyed value."