Allbirds stock plummeted Thursday after initial excitement about the sneaker company’s shift to artificial intelligence. The track record of such pivots isn’t promising.
Allbirds shares slid 30% in early trading, after rising more than sixfold on Wednesday when it said it was raising $50 million to buy AI servers and rent them out, changing its name to NewBird AI in the process.
“The company has no existing GPU [graphics processing unit] inventory, no data center footprint, no engineering talent on record, and no customer pipeline disclosed at the time of yesterday’s announcement,” wrote Renaissance Macro Research’s Jeff deGraaf in a research note. “What it has is a press release, a new name, and a single day’s worth of market enthusiasm. History has an opinion on that combination.”
The most recent example of a comparable pivot was Algorhythm Holdings. Formerly a karaoke machine company, the stock more than tripled in February when the company claimed it would shake up thelogistics industrywith AI innovation. Since then, shares have tumbled around 70%.
Media company BuzzFeed has also had little success in an AI push, using the technology to generate content and launching AI-powered social apps. BuzzFeed shares are down 98% since its listing in late 2021.
More broadly, investors will be hoping that such radical corporate makeovers don’t indicate parallels with the dot-com bubble of the late 1990s, when multiple companies soared on the power of little more than a name change.
Renaissance Macro Research’s DeGraaf notes the example of Books-a-Million, a bookstore chain that briefly climbed more than 1,000% on the announcement of an updated website in 1998.
“When a company that sold its shoe brand for $39 million—less than ten cents on the dollar of its peak valuation—can add a $127 million of market capitalization in a single trading session simply by announcing a pivot to GPU leasing, the market is not pricing risk. It is pricing narrative,” said Mark Malek, CIO at Siebert Financial.
For now shareholders look to be giving Allbirds the benefit of the doubt. But if its AI vision doesn’t work out, expect it to join the list of examples of when investors got carried away by a mania.