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Walk into any office in Silicon Valley in the late 2010s and you’re likely to see at least one pair of Allbirds. Woolen and eco-friendly, the sneakers once represented a certain kind of corporate culture (even Barack Obama was a fan), and the company behind them was valued at roughly $4 billion at its peak in 2021. But for several years, sales declined. Attempts to replicate the success of its signature product—see: wool leggings and wool underwear—did little to keep the business afloat. Earlier this year, Allbirds sold most of its holdings for a penny and closed its remaining retail outlets. Now he has one last idea: a hard turn toward AI.
The plan, announced yesterday, is to change its name to NewBird AI and spend $50 million from an unnamed investor on specialized chips called GPUs, which it will then lease to other companies. The move is a high-risk attempt to save the company’s stock, and it’s already kind of worked: Allbirds’ value rose more than 600 percent yesterday. While companies are constantly refocusing on AI, Allbirds is trying a far more extreme version of the strategy. At first glance, it might seem like a cynical (and quite possibly doomed) cash-grab. But for a shoestring company, rebranding AI can also be an escape route.
Last month, Allbirds sold for less than 1 percent of what it was worth in 2021. Since almost nothing was spared in the fire sale, it is now essentially a creation of corporations. Bloombergis Matt Levine discussed yesterday that the company could be counting on tech executives’ “nostalgic affection for their brand” to make this turnaround work. But Allbirds CEO Joe Vernachio is a veteran of the outdoor apparel industry and has no discernible AI experience; the company did not respond to questions about the future of its executive team or the future of other people who work there.
There’s an obvious reason for companies to jump on the AI bandwagon — the technology is creating enormous wealth. The S&P 500 hit a record high yesterday, thanks in part to the strength of the US technology sector. And that’s not even taking into account the two leading AI companies, both of which are private. OpenAI and Anthropic are valued at around $1.2 trillion combined – more than the GDP of Poland. When these companies go public, as they are expected to in the not-too-distant future, they will generate staggering wealth for their executives and investors.
The idea that a shoe company could use an AI rebrand to quickly boost its stock price is likely to heighten the suspicions of those who resented that we are in a bubble. The cautionary tale of the crypto craze resounds: In 2017, shares of Long Island Iced Tea Corp. 500 percent after the company announced the transition to blockchain technology. The conditions were short-lived. A year later, Long Blockchain Corp. (also got a new name) was delisted from NASDAQ. When video game retailer GameStop tried to a similar crypto pivot In 2022, its shares rose 30 percent in one day. But that ultimately didn’t stop the company’s gradual decline from the lofty stock memes it saw in 2021. The maneuver failed in the long run in part because it muddied the idea of what GameStop was all about: Why was there a store where I once shopped Assassin’s Creed III suddenly sell NFT?
But in this unprecedented market, where private lenders there are many and VCs are doubling down on AI, flexibility can be a good thing. Many companies have incorporated AI into their existing products over the past few years, albeit with varying levels of success. Mattel’s toys will soon have AI components, PepsiCo wants to rely on AI agents to transform its sales and operations, and Bath & Body Works used AI to develop a “scent finder” called Gingham Genius. Few businesses are immune to the allure of this technology and the investment potential that usually comes with it.
NewBird AI’s lack of experience in the sector will make it difficult to turn short-term stock declines into long-term success. Questions remain about who is investing in the business and how effectively its leaders can continue to raise money in the future. The $50 million that Allbirds has secured, with only $5 million up front, is less than what the biggest AI companies bring in regularly. OpenAI announced $122 billion in new funding late last month. And it is unclear whether Allbirds will have access to such a species private credit lines which other public companies have relied on for their AI ambitions. Despite the financial promises of a new business model, Allbirds is really just a small, inexperienced player in an already crowded market. Perhaps due to traders’ calming expectations, shares fell by approx 25 percent today.
Allbirds is now losing much of what made it special during its boom years and adapting to a business climate where raw computing power is king. Despite the founding mission to produce sustainable footwear, the company is turning to the notorious energy intensive tech industry angle and likely cutting language on environmental protection from its charter. Whether this rebranding succeeds or not, it has already highlighted the absurd appeal of artificial intelligence – and how much of our economy has been drawn into its orbit.
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Today’s news
- President Trump said the United States could to hold talks with Iran this weekend and that the two countries are “very close” to a dealeven as the US military expands its blockade of ships linked to Iran. He also announced a 10-day ceasefire between Israel and Lebanon starting today and invited the leaders of both countries to Washington, DC, for peace talks.
- A federal judge ordered Trump to do so stop the above-ground construction of the planned hall of the White House despite the administration’s claims that it was necessary for national security, ruling that the project could not proceed without congressional approval.
- Trump nominated by Erica Schwartzvaccine supporter who served as deputy surgeon general during his first term to lead the CDC. If confirmed, she would be the fourth head of the agency in about a year.
Evening reading
Authoritarianism is quietly beginning to crumble
Author: Gal Beckerman
In the days after Donald Trump won his second term, I called a handful of Hungarian political analysts to ask what America’s future might look like. My impulse was not original; analysts have made many calls of this type. Hungary seemed to be leading the illiberal direction in which Trump said he was going to lead the United States. During his decade and a half rule, Prime Minister Viktor Orbán set it up electoral and legislative system for the benefit of his party control (directly or indirectly) 80 percent of the media in the country, and hinders most independent institutions. But when I asked these Hungarians to give it to me right away, they started telling me another story, about what happened on the “islands”.
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Rafaela Jinich contributed to this newsletter.
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