Allbirds' AI Pivot Sends Stock Soaring 700%—Then Crashes 35% in Two Days

Allbirds, the once-popular sneaker brand, made headlines this week with a baffling announcement: a pivot to AI infrastructure under the new moniker "NewBird AI." The move stunned investors, sending shares surging by over 700% on Wednesday. However, the rally came to an abrupt end on Thursday, with the stock crashing 35%.

The dramatic reversal underscores growing concerns about an AI investment bubble, where speculative enthusiasm often overshadows business fundamentals. Allbirds' core shoe business has been struggling, with the company selling off intellectual property and assets for just $39 million weeks earlier—far below its $4 billion market cap from five years ago.

From Shoes to AI: A Pivot That Raised Eyebrows

Allbirds' decision to rebrand and refocus on AI infrastructure left many scratching their heads. The company, known for its eco-friendly footwear, offered no clear explanation for how it would leverage AI to revive its fortunes. Investors, however, seemed momentarily enchanted by the AI hype.

"This has the feel of a meme stock, where emotions take over and logic and reason get thrown out the window," said Adam Sarhan, CEO of 50 Park Investments, in an interview with Bloomberg. "That the market actually rewarded the stock yesterday when it doesn’t seem to have any kind of actual AI edge tells me that froth, specifically AI froth, is picking up."

Sarhan added, "Between the risk of a huge reversal or a short squeeze, I can’t see any reason why you’d want to play this. The vast majority of times, these things end in tears."

A short squeeze occurs when a heavily shorted stock rises rapidly due to short sellers buying back shares to cover losses, not because of underlying business performance.

AI Hype Echoes Past Speculative Trends

Allbirds' stock surge and subsequent crash mirror past examples of companies attempting to capitalize on trending technologies without a solid foundation. In 2017, Long Island Iced Tea Corp. rebranded as "Long Blockchain Corp", causing its stock to jump over 200%. The company, however, never truly pivoted to blockchain technology. Its shares were delisted in early 2021, and the SEC charged three individuals with insider trading in connection with the scheme.

"The market is not pricing risk," wrote Mark Malek, CIO of Siebert Financial, in a note to investors. "It is pricing narrative. It is pricing the word ‘AI’ the same way it once priced the word ‘blockchain.’"

What’s Next for Allbirds and AI Investments?

As Allbirds' stock volatility demonstrates, the AI sector remains highly speculative. While some investors are drawn in by the promise of rapid growth, others warn of a potential bubble. The company’s sudden shift to AI has raised questions about its long-term strategy and whether it can deliver on its lofty ambitions.

For now, the market’s reaction to Allbirds’ pivot serves as a cautionary tale about the risks of chasing trends without substance. Whether this marks the beginning of a sustainable AI venture or another speculative misfire remains to be seen.