CHICAGO – Struggling shoe retailer Allbirds’ surprising pivot to artificial intelligence infrastructure is looking more like a flash in the pan for the stock than a driver of long-term gains.
Shares of the firm, which said it plans to re-brand itself as NewBird AI, sank 36 per cent on April 16, its biggest drop in three years. The plunge represented a swift, but only partial, reversal from the knee-jerk reaction a day prior, when the stock soared more than 582 per cent – adding US$127 million (S$162 million) in market value.
“This has the feel of a meme stock, where emotions take over and logic and reason get thrown out the window,” said Adam Sarhan, chief executive of 50 Park Investments. “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.”
Nearly 300 million shares exchanged hands on April 15, several times the daily average of just over 20 million. According to Vanda Research, retail daily net buying hit a record that day, surpassing even the company’s listing.
Both the company’s pivot and the stock’s reaction were met with incredulity.
“Between the risk of a huge reversal or a short squeeze, I can’t see any reason why you’d want to play this,” Mr Sarhan said. “The vast majority of times, these things end in tears.”
William Blair analyst Dylan Carden called the pivot to AI “by any measure a Hail Mary” for a stock that has lost about 96 per cent of its value since it went public in 2021. He dismissed the share spike on April 15 as “some combination of a very shallow float, automated momentum, and unchecked hype.”Mr Carden dropped his coverage, seeing “limited utility” in continuing to follow the stock.
There are precedents for such spikes on Wall Street. Beyond the pandemic-era meme-stock craze, which sent GameStop and AMC Entertainment Holdings to the stratosphere, companies like CaliberCos and Eightco Holdings spiked on crypto-related moves last year.
In February, Algorhythm Holdings saw a spike in interest that recalled Allbird’s, soaring more than 200 per cent in a single session after the former karaoke company announced a focus on AI-related logistics. It is down about 70 per cent off that peak.
Allbirds, which didn’t respond to a request for comment, wasn’t the only company to get a boost this week from a shift to AI. Myseum – a social-media company that closed with a market cap just over US$6 million on April 15, announced a new focus on AI, along with a rebrand to Myseum.AI. Its shares jumped 130 per cent on April 16.
Gene Munster, managing partner of Deepwater Asset Management, said such moves were reflective of how retail investors remain optimistic about AI, and how they’re trying to find the next meme winner.
“There wasn’t any substance to the announcement, but substance doesn’t matter when it comes to enthusiasm and potential,” he said of Allbirds. “What you need for a meme stock is a big opportunity, and a healthy dose of absurdity. This lines up perfectly.” BLOOMBERG
