When Shoe Companies Pivot to AI, Run

Chart of the Week #99

Earlier this week, I wrote about why we think the stock market is lying to you — overvalued, dangerously concentrated, and propped up by one bet: that this time, pouring hundreds of billions into a technology that doesn't yet pay for itself will somehow end differently than every other time it's been tried.

Since then, the S&P 500 has broken through to a new all-time high. Meanwhile, the U.S. is still blockading the Strait of Hormuz with a dozen warships. Brent crude is near $100. The IMF just slashed its global growth forecast (and raised its inflation outlook). And what the White House calls a "military campaign" looks more like an all-out war every day. The market's response? Record high.

But never mind the macro. I want to show you something that makes the point better than any of those facts could.

That’s Allbirds. Ticker: BIRD. If you don’t know them, they make wool sneakers. Or rather — they used to. Revenue had fallen nearly 50%, from $298 million in 2022 to $152 million by last year. The stock was trading under $2.50. A slow-motion failure of a company by just about every measure.

Then, yesterday, the stock spiked more than 600%. From a close of $2.49 to over $17 intraday. On a single day.

So what happened? Did they discover a new technology? Land a massive contract? Get acquired at a premium?

No. They announced they’re pivoting to AI.

That's it. The company sold its entire footwear business for $39 million, rebranded itself "NewBird AI," and declared it would become a "GPU-as-a-Service and AI-native cloud solutions provider." No product. No revenue. No customers. Just the words "artificial intelligence" in a press release — and the stock went vertical. I mean — just look at that chart.

If you’ve been reading us for a while, this might remind you of something. In the late ‘90s, the same kind of mania played out around the internet. Pets.com surged to a $290 million valuation on its IPO. theGlobe.com — an early social network — soared over 600% on its first day of trading. Webvan — an online grocery delivery company that had never turned a profit — went public at an $8 billion market cap. The numbers were just as absurd then as NewBird AI’s are now.

And we know what happened next. From 2000 to 2002, the Nasdaq lost nearly 80% of its value. The S&P 500 was cut in half. It took the stock market over a decade to recover.

That’s what I see when I look at this Allbirds chart. A symptom. The AI market right now has $700 billion a year going into infrastructure and about $12 billion coming back in consumer revenue. That’s the gap I wrote about on Tuesday. And when a gap like that exists — when there’s that much money chasing a narrative — it doesn’t just inflate the companies doing the real work. It inflates everything. Including a shoe company with a press release.

As of this writing, the stock has already given back about 30% of yesterday’s gains — trading around $12, still nearly five times where it was two days ago. I’m pretty sure it’s just the beginning. And not just for NewBird AI — for the entire mainstream stock market, which has never been more concentrated or more dependent on a single bet paying off.

Regards,

Lau Vegys