Allbirds sinks as 582% AI surge comes to screeching halt

[CHICAGO] Allbirds’ surprising pivot from wool sneakers 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 company, which said that it plans to rebrand itself as NewBird AI, sank 36 per cent on Thursday (Apr 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.

“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 does not 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 Wednesday, several times the daily average of just over 20 million. According to Vanda Research, retail daily net buying hit a record on Wednesday, surpassing even the company’s IPO.

“If the investor relations team at BIRD needed a vote of confidence, retail investors certainly gave them a thumbs up yesterday,” Vanda wrote.

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 cannot see any reason why you’d want to play this,” 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 on Wednesday’s spike as “some combination of a very shallow float, automated momentum, and unchecked hype”. 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 such as CaliberCos and Eightco Holdings spiked on crypto-related moves last year.

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In February, Algorhythm saw a spike in interest that recalled Allbirds, 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 did not respond to a request for comment, was not 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 Wednesday, announced a new focus on AI, along with a rebrand to Myseum.AI. Shares jumped 130 per cent on Thursday.

Gene Munster, managing partner of Deepwater Asset Management, said such moves were reflective of how retail investors remain optimistic about AI, and how they are trying to find the next meme winner.

“There was not any substance to the announcement, but substance does not 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