Allbirds became a meme stock this week after announcing plans to hang up its sneakers and enter the world of AI infrastructure.
The stock surged more than 800% on Wednesday, but the gains tapered off on Thursday. The stock price fell by up to 30% during the session.
Allbirds sold its shoe business $39 million At the end of March, the company plans to take advantage of a $50 million convertible loan facility to enter the world of AI computing infrastructure. This is certainly a large company, but much larger companies in this space, like CoreWeave, face challenges and volatility in both stocks and bonds.
One advantage may be that Allbirds (now NewBird AI) comes in at a time when commentators have expressed concern that the supply of critical computing infrastructure is not keeping up with demand. Still, this is a bold plan like many other companies have tried before (remember Long Island Blockchain Corp?).
Here’s what investment pros are saying about Allbirds’ AI pivot.
Allbirds’ bet on AI is ‘the height of stupidity’
“The transition from selling wool sneakers to pursuing AI computing could be one of the wildest turning points this quarter,” said Shay Boroa, Futurum’s chief market strategist.
Futurum CEO Daniel Newman responded, calling it “the most ridiculous pivot I’ve ever seen.” The analyst said Allbird’s surge was due to capital outflows from what he called “more legitimate AI REITs” such as CipherMining, TeraWulf and IREN Limited.
“This is going to end badly. $50 million to build an AI cloud. The height of stupidity,” Newman posted as the stock soared.
Repercussions of the dot-com bubble
Liz Ann Saunders, chief market strategist at the Schwab Center for Financial Research, said she was skeptical.
“I have no role in this game and don’t cover individual stocks, but the story of AllBirds is that a struggling consumer brand with a well-known name uses a public shell to access the story of a hot topic…The business doesn’t matter, only the association matters. In the ’90s it was Internet commerce, now it’s GPU infrastructure.”
Mark Marek, head of investments at Sievert Financial, also drew comparisons to the dot-com era, noting that companies betting on the endless demand for resources such as AI computing are asking for trouble.
“The explosion is coming,” he said.
“A drop in the bucket”
In response to the news, William Blair analysts issued a note informing clients that they would no longer cover Allbirds’ transformation of its AI strategy.
“This is a hurray no matter how you look at it…Nonetheless, the stock price is overstated, trading at an enterprise value of about $140 million on the news, up from a pre-announcement valuation of nearly $10 million.”
“Given deep uncertainty about the downsizing of the footwear business and new initiatives in cloud computing, there are no metrics here,” they added.
Analysts say the $50 million the company plans to use to fund its transition to AI infrastructure is “just a drop in the bucket in the broader neocloud market, where most companies are spending capital investment budgets in the billions.”
Stock market hits record high, BIRD soars
Citorini is Virtual AI doomsday scenario “Why don’t we wait until we’re at least 5% above our all-time high before we start this,” he joked about Allbird’s huge stock price rally, which spooked investors earlier this year.
“A company that sold its shoe brand for $39 million (less than 10 cents at peak valuation) could increase its market cap by $127 million in a single trading session by announcing a switch to GPU leasing, and the market isn’t pricing in the risk,” said Mark Marek of Financial.