For the birds - Global market update

Allbirds is a San Francisco-based fashion company that initially became popular among Silicon Valley workers with its basic eco-friendly wool sneakers. But early excitement around the brand gave way to product missteps and increased competition that eroded its value. It made expansion attempts to win over young shoppers and runners by rapidly extending its store footprint and product offerings, drifting far from its core shoes with leggings and puffer jackets – but those efforts fell short. Sales declined by double-digit percentages each of the last three years.

The company listed on the stock market in 2021 to much fanfare and the shares traded at over $500 before the highflyer became a dead parrot, trading around $3.00 early last week. But then something strange happened – it sold all Allbirds’ assets and intellectual property for about $39 million to American Exchange Group and announced that it was ‘pivoting’ to become an AI (Artificial Intelligence) Infrastructure company!!

Yes, you read that right – shoes to AI! I’m no expert, but having a failed eco-shoe brand on your resume can’t possibly enhance, or even establish, your credentials in cloud solutions. Picture the sales pitch if you ran a big technology company andwanted to expand your AI capabilities and needed to rent access to graphics processing units (GPUs), and a GPU-as-a-service/AI-cloud company rocked up at your door. Naturally you say, “so tell me a little bit about your company”. If the company said, “well two weeks ago we were a sneaker company, but we have since pivoted to AI,” you might say “eh, are you having a laugh? – we’re going to go with someone with a bit more AI experience and, you know, that owns an actual data centre”. Call me old fashioned, but it is not obvious that making sneakers is the best preparation for selling AI compute.

And yet, the market is telling me I am wrong because the share price rallied on the day from $3 to (at one point) $24 before closing at $17. Time will tell, but what is of more importance is to set this in the wider market context that has seen the share prices of software companies, in particular, but also a broader list of sectors that include media, transport and logistics, industrials, and legal and accounting, sell off significantly on the perceived threat that the ‘AI will eat their lunch’.

Maybe what we saw in Allbirds is just another example of the meme stock shenanigans of Gamestop etc, or maybe it reflects a week with little in the way of new developments on the Iran conflict for a market that has been fed a daily dose of headlines and is craving the new news. Either way, the sooner investors have something concrete to focus on the better.

As for what that concrete thing is, the longer the Iran conflict continues, even though missiles may not be flying now, trade flows of oil, natural gas and fertilisers remain significantly restricted through the Strait of Hormuz, and this will have an impact on inflation, consumer sentiment and ultimately global economic growth. Should this occur to any meaningful degree, investors will be faced with analysing its impact on corporate profit growth in the back half of 2026 – and if growth rates fall, then, while valuations may not be excessive, the ability of stock markets to push higher may well be restricted. The Allbirds chicks may well come home to roost!!