The Allbirds Pivot Is a Terrible Idea … Right?
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Walk into any Silicon Valley office in the late 2010s, and you’d probably see at least one pair of Allbirds. Woolly and eco-friendly, the sneakers once epitomized 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 have flagged. Attempts to replicate the success of its signature product—see: wool leggings and wool underwear—didn’t do much to keep the business afloat. Earlier this year, Allbirds sold most of its holdings for pennies and closed its remaining retail stores. Now it has a last-ditch idea: a hard pivot to 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 bid to save the company’s stock, and it has already kind of worked: Allbirds’ value increased by more than 600 percent yesterday. Although businesses reorient themselves around AI all the time, Allbirds is trying a far more extreme version of the strategy. At first glance, it might look like a cynical (and very possibly doomed) cash grab. But for a flailing shoe company, an AI rebrand might also be an escape hatch.
Last month, Allbirds was sold for less than 1 percent of what it was worth in 2021. Because almost nothing has been spared in the fire sale, it is now essentially a shell corporation. Bloomberg’s Matt Levine argued yesterday that the company might be banking on tech executives’ “nostalgic fondness for their brand” to make this pivot work. But Allbirds CEO Joe Vernachio is a veteran of the outdoor-apparel industry and has no apparent 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 train—the technology is creating enormous wealth. The S&P 500 hit a record high yesterday, thanks in part to the strength of the American tech sector. And that doesn’t even account for the two leading AI companies, both of which are private. OpenAI and Anthropic are valued at about $1.2 trillion combined—more than the GDP of Poland. When those companies go public, as they’re expected to in the not-too-distrant future, they will generate astounding wealth for their executives and investors.
The idea that a shoe company can use an AI rebrand to quickly juice its stock price will likely strengthen naysayers’ suspicions that we’re in a bubble. It echoes a cautionary tale of the crypto craze: In 2017, shares of Long Island Iced Tea Corp. jumped as much as 500 percent after the company announced a pivot to blockchain technology. The highs were short-lived. A year later, Long Blockchain Corp. (it got a new name too) was delisted from the NASDAQ. When the struggling video-game retailer GameStop tried a similar crypto pivot in 2022, its stock climbed 30 percent in a day. But that ultimately didn’t prevent the company’s gradual descent from the meme-stock highs it had seen in 2021. The maneuver failed in the long run in part because it muddied the idea of what GameStop even was: Why was the brick-and-mortar store where I once bought Assassin’s Creed III suddenly selling NFTs?
But in this unprecedented market, where private lenders abound and VCs are doubling down on AI, flexibility can be a good thing. Plenty of 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 has used AI to develop a “fragrance finder” called Gingham Genius. Few businesses are immune to the lure of this tech, and to the potential for investment that tends to come with it.
NewBird AI’s lack of experience in the sector will make it difficult to turn a short-term stock bump into long-term success. Questions remain about who’s investing in the business, and how effectively its leaders might continue raising money in the future. The $50 million that Allbirds has secured, with just $5 million up front, is dwarfed by what the biggest AI companies are regularly bringing in. OpenAI announced $122 billion in new funding late last month. And it’s unclear whether Allbirds will command the kind of access to private credit lines that other public companies have relied on for their AI ambitions. Despite the financial promise of its new business model, Allbirds is really just a tiny, inexperienced player in an already crowded market. Perhaps accounting for traders’ tempering expectations, the stock has fallen by about 25 percent today.
Allbirds is now shedding much of what made it distinct during its boom years and adapting to a business climate in which raw computing power is king. Despite a founding mission to make sustainable footwear, the company is turning to a notoriously energy-intensive corner of the tech industry and likely slashing language about environmental conservation from its charter. Whether or not this rebrand succeeds, it has already underscored the absurd pull of AI—and just how much of our economy is being drawn into its orbit.
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Evening Read
The Quiet Way Authoritarianism Begins to Crumble
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In the days after Donald Trump won his second term, I called a handful of Hungarian political analysts to ask what the American future might look like. My impulse was not an original one; the analysts had been fielding many calls of this sort. Hungary seemed like a bellwether for the illiberal direction in which Trump said he was going to lead the United States. Over his decade and a half reign, Prime Minister Viktor Orbán had rigged the electoral and legislative systems for his party’s benefit, come to control (directly or indirectly) 80 percent of the country’s media, and hobbled most independent institutions. But when I asked these Hungarians to give it to me straight, they started to tell me another story, about what was happening on “the islands.”
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Rafaela Jinich contributed to this newsletter.
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