Allbirds, a struggling shoemaker that puts sustainability at the heart of its business, has announced plans to exit the footwear business and instead focus on AI infrastructure.
Having sold its intellectual property and certain other assets and liabilities to American Exchange Group just three weeks ago in a deal valued at an estimated $39 million, Allbirds has announced what’s next for the firm. While many would expect a shoemaker to pivot into other fashion lines, the company has instead decided that it wants to change its name to NewBird AI and start providing AI compute.
Allbirds was once valued at $4 billion, which wasn’t bad for a sustainability-focused shoemaker. The problem is though, the business has been struggling since those highs, with its share price having valued the firm at around $21 million earlier this week. So, what better way to save your business than add the words ‘AI’?
For now, the plan is straightforward enough on paper. Allbirds said the initial capital it received from the sale of its IP and from an institutional investor will be used to acquire high-performance GPU assets, which would then be deployed to serve customers requiring dedicated AI compute capacity. Over time, the company says it wants to build out a broader GPU-as-a-service and AI-native cloud offering.
The company’s pitch is, like many others right now, that demand for AI is high and yet supply is constrained. It believes that it can meet that customer demand that spot markets and hyperscalers are unable to reliably service.
Allbirds initially plans on focusing on the North American market, where data vacancy rates are the most constrained, but it will face an uphill battle. There are already many new entrants vying to fix the problem AI has created – and many have better financing than an ailing shoemaker.
Despite scepticism as to whether Allbirds will actually be able to turn things around with its new strategy, Wall Street investors didn’t seem to care. The firm’s stock price soared more than 500% after the announcement, with its valuation sitting at around $147 million – not bad for a simple announcement.
That’s led many to worry about whether this is actually a viable scheme that could pay off, or more simply a pump and dump to take advantage of the hype around AI. Others have also contended that moves like this signal an increasing likelihood that there’s an AI bubble, one that could eventually burst. The situation has been compared to the dotcom boom, where similar announcements were made by long-established brands as they sought to capitalise on the increased valuations offered to internet companies.
It’s certainly an odd decision for Allbirds, but given its recent struggles, it had no choice but to try something drastic to save the company from collapse. A key question that now remains, however, is whether ‘sustainability’ will still be a key part of its brand, or if it’s decided to ditch that alongside its shoemaker roots.
