Allbirds, the eco-friendly shoe brand co-founded by the former All White and on the feet of tech CEOs and movie stars before falling on hard times, is pivoting to artificial intelligence.
The San Francisco-based company announced it has entered into a definitive agreement to raise US$50 million (NZ$84.5 million) with an undisclosed institutional investor to transition its operations to AI infrastructure. It also has a new name: NewBird AI. The company plans to use the proceeds to buy graphics processing units, known as GPUs. The transaction is expected to close during the second quarter of this year.
The announcement comes more than two weeks after Allbirds sold intellectual property and certain other assets and liabilities to American Exchange Group, a leader in accessory design, licensing and manufacturing, for US$39 million (NZ$67.8 million). The company owns retail brands including Aerosoles, White Mountain, Jonathan Adler and Ed Hardy.
This is a significant drop from Allbirds’ peak valuation of US$4 billion at the end of 2021. The company had announced that it would not issue its quarterly financial report, which was scheduled for March 31st.
“The increasing development and adoption of AI is creating an unprecedented structural demand for specialized, high-performance computing that the market is struggling to meet,” the company said in a release. “NewBird AI is built to fill that gap.”
The sustainable shoe brand was founded by former all-white Tim Brown, and its products are sold as easy-to-wear wool shoes worn by former US President Barack Obama, Hollywood star Leonardo DiCaprio, Silicon Valley executives, and more.
The dramatic change in direction has some industry watchers scratching their heads.
“On the surface, this is a strange turn,” said AI infrastructure expert Bill Kleiman. “I’ve been in this industry for a while, and it’s not a very natural adjacency for a company like Allbirds to go from shoes to AI infrastructure.”
It’s unclear how Allbirds will reinvent itself as a “GPU-as-a-Service” business that rents computing power to AI companies. That means selling access to vast numbers of graphics processors and other specialized AI computer chips designed by companies like Nvidia and AMD, typically running in large data centers run by cloud computing giants like Amazon and Oracle.
Businesses running physical AI infrastructure “require access to GPUs in constrained markets, long-term power contracts, advanced cooling strategies, and reliable operating models,” said Kleyman, CEO and co-founder of Apolo.us.
The latest development marks a dramatic change since the company was founded in 2015 by Brown and renewable resources expert Joey Zwillinger. Its mission is to make shoes from natural materials rather than synthetic fibers. A year later, Allbirds introduced its iconic wool runner shoes. But like many dot-com brands that open brick-and-mortar stores, the company overextended. And many consumers lost interest.
After selling 3 million pairs of shoes in 2022, Allbirds struggled due to supply chain issues. The New York Times claimed that it had become obsolete and its design was copied by other companies.
Brown stepped down as co-CEO in May 2023, but remained on the board.
The brand closed most of its remaining stores in February to focus on e-commerce, store partnerships and international distributorship. The company currently operates two outlet stores in the United States and two full-price stores in London.
Allbirds’ shares soared more than 600% on Wednesday’s news and were trading near US$18 (NZ$30) in late afternoon trading. A few days ago, the stock was trading at US$3 (NZ$5). It previously traded at $520 per share.
Kleiman said the stock market’s surge is “more of an initial wave of excitement and speculation around AI than a validation of execution.”
Kleiman also pointed out that US$50 million is not a lot to enter an infrastructure-focused market, adding that everyone seems to want to be an AI company.
“Some of these changes are practical and strategic,” he says. “Some people find it more reactive. It’s fair to say it can come across as a bit desperate in this case. The underlying business is struggling, and AI presents a compelling narrative reset.”
– Additional coverage by 1News
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