Allbirds (BIRD), once celebrated for its sustainable footwear, has made a striking shift towards the artificial intelligence (AI) sector, exemplifying the continued allure of AI within today’s market. Last week, the company announced its transformation into an AI-focused entity, rebranding itself as “NewBirdAI.” This unexpected pivot saw its stock price skyrocket nearly 600% last Wednesday, jumping from around $3 to over $10 per share by the week’s end.
While the specifics of how Allbirds will harness AI remain vague, the company’s strategy involves acquiring high-performance AI computing hardware to lease to customers facing unmet needs from major providers. This shift has raised eyebrows across the investment community, with experts suggesting that Allbirds is capitalising on the current market trend driven by the fear of missing out (FOMO).
According to Matt Domo, an AI advisor and former general manager at AWS Database, the move could be seen as a desperate attempt to rejuvenate stock prices. “It’s a Hail Mary to juice the stock,” he explained, noting that the AI market is booming, capturing investor interest. However, there are doubts regarding Allbirds’ capability to transition successfully. Concerns centre around its lack of a comprehensive plan, insufficient expertise in AI among its leadership team, and potential funding challenges.
Historically, most of Allbirds’ executives have backgrounds in apparel rather than technology. Only the chief technology officer has relevant experience in the tech sector, having previously worked for TurboTax. Domo expressed skepticism about the feasibility of quickly establishing a robust AI expertise within the company, citing the high capital investment required for infrastructure like data centres and advanced compute chips. The proposed $50 million fundraising is relatively minor compared to the enormous capital commitments from major tech giants like Microsoft, Alphabet, Amazon, and Meta, which collectively amount to roughly $650 billion.
Despite its shift, Allbirds will continue to offer its shoe products, which were sold to the American Exchange Group earlier this year for $39 million. The company’s recent actions prompt questions about a potential market bubble within the tech industry, particularly as it relates to the AI boom. Mark Malek, chief investment officer at Siebert Financial, highlighted “real problems at the fringe” of the market due to an easy capital environment and heightened enthusiasm for AI.
Still, he remains optimistic about the broader tech sector, pointing out that companies like Meta and others in what he calls the “Magnificent Seven” still show strong fundamentals, distinguishing them from more speculative ventures like Allbirds’ transformation.
The outlook for AI remains predominantly positive, even amid such skepticism. Bank of America forecasts significant earnings growth in the technology sector for the S&P 500, with AI-focused companies like Nvidia and Micron expected to contribute substantially. Wedbush analyst Dan Ives also reflects a bullish sentiment, indicating that tech stocks could rise further as strong demand continues for AI capabilities.
In summary, while Allbirds’ pivot to AI may attract short-term attention and investment, doubts linger regarding its execution and underlying strategy in this highly competitive field. The move illustrates both the excitement and risks present in a market increasingly enamoured with AI technologies, inviting scrutiny from analysts and investors alike.
