Allbirds' AI pivot sends its stock soaring nearly 600%. We've seen this movie before.

By Britney Nguyen

It's not unprecedented for struggling companies to latch on to the hot trend of the moment - remember the blockchain hype cycle?

Allbirds plans to acquire GPUs and offer compute services.

After losing its relevance as a purveyor of tech-bro sneakers, Allbirds now says it wants to become an artificial-intelligence company - and its stock just finished the day up nearly 600% on record trading volume.

There's precedent for companies attempting dramatic - or desperate -pivots in an attempt to capitalize on hot trends. This was a popular strategy in late 2017 and early 2018, as businesses sought to hop on the blockchain bandwagon.

For Long Blockchain, formerly Long Island Iced Tea, the move didn't exactly pan out; its stock initially soared on the pivot, but was delisted less than a year later. Riot Platforms (RIOT), once a diagnostic-equipment company that turned to bitcoin (BTCUSD) mining and then to AI compute, has fared better.

Now, Allbirds (BIRD) is hoping that an AI overhaul can give it new life. The company said on Tuesday that it had struck an agreement for a $50 million convertible financing facility that will allow it to achieve its "long-term vision" of becoming an AI infrastructure provider.

See more: How Allbirds went from a $2.2 billion IPO to a $39 million flop

Allbirds said it plans to change its name to NewBird AI and deploy graphics processing units as a neocloud company, similar to CoreWeave (CRWV). It said it expects to use the initial capital from the financing to acquire GPUs and provide access to customers under long-term leases, and then grow over time to provide compute and other services.

That might be easier said than done. The initial $50 million facility "is minuscule compared to what it actually takes to be one of these service providers," Jason Schloetzer, associate professor at Georgetown University's McDonough School of Business, told MarketWatch.

Look at CoreWeave, which is expected to spend $30 billion this year as it invests in building out data-center capacity. Even with that footprint and a roster of high-profile customers, Bernstein analysts warn that CoreWeave could lose ground over time as compute supply becomes less scarce.

Read on: How CoreWeave's 'situationship' with Big Tech could cause a 30% stock drop

Allbirds, for its part, sees "unprecedented structural demand for specialized, high-performance compute that the market is struggling to meet," it said in a statement. The company noted the rise in hyperscaler spending on AI, and investments in AI data centers, coinciding with compute shortages.

But Seaport Research analyst Jay Goldberg said it's "hard to see a company like this coming out of left field having much to offer."

Allbirds' stock popped 582% in Wednesday's trading action. Matt Domo, the CEO of advisory firm FifthVantage, said that he saw the AI pivot as a way for the company to boost its struggling stock. The company recently agreed to sell its intellectual property and other assets to American Exchange Group, marking a spectacular comedown for what was once a hot footwear brand.

AI infrastructure, of course, is a different breed than making shoes. "It takes special expertise, it's costly and people have high expectations - they're betting their business on you," said Domo, who played an early role in the development of Amazon's (AMZN) AWS cloud-computing business.

Yet the allure of AI is drawing in new entrants. "That's why you see pretty seasoned people making bets, whether they're public or private, to take advantage of this," he said. "If done well, it can be an exponential game changer - the key is 'done well.'"

See also: Nvidia's stock seals its longest winning streak ever. Is the momentum for real?

With surging interest in this market, investors should be wary of companies that are "AI washing," or trying to market AI capabilities that are barely existent, Domo added.

For investors that are interested in long-term AI-related growth prospects, Schloetzer noted that there are established players that already have software and systems that stand to benefit when the technology takes off with enterprises and consumers.

"If you're someone looking for evidence of a bubble, this would be something to point to," Schloetzer said. Or, viewed more optimistically, the rush of new AI players may suggest that there's "continued enthusiasm" for growth, he added.

More from MarketWatch: Is Tesla a chip stock now? Investors are cheering a semiconductor milestone.

-Britney Nguyen

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04-15-26 2058ET