Allbirds' AI dream lasted only one day—after surging 582% on Wednesday, it plunged 36% in a single day on Thursday.

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Allbirds' "AI transformation" rally came fast and went even faster.

On Thursday, April 16, "Silicon Valley's Foot Balance" Allbirds plunged nearly 36%, continuing to drop more than 6% after hours. Previously, after announcing a pivot to artificial intelligence infrastructure, its stock soared over 582% on Wednesday.

According to Wallstreetcn, the wool sneaker company Allbirds announced it would change its name to NewBird AI. Previously, most analysts remained skeptical of the surge, believing it was just an outburst of emotion under the AI frenzy.

Adam Sarhan, CEO of 50 Park Investments, warned that such rallies "often end in tears" and pointed out that the market was still flocking to the company despite it having no real AI edge, indicating that the "AI bubble is heating up."

Analyst: No Substantial AI, The Surge Is Just "All or Nothing"

On April 15, Allbirds announced it would abandon its main footwear business and pivot to AI computing power, planning to rename itself "NewBird AI".

After the news, the company's stock soared about 580% in a single day, from under $3 to about $17, with its market value ballooning dramatically from about $21 million to about $148 million. This scene once again drew high market attention to "AI concept speculation".

The market reaction to the transformation announcement was polarized. Funds quickly poured in, pushing the price up, but on CNBC, renowned host Jim Cramer bluntly commented:

This is just ridiculous.

William Blair analyst Dylan Carden characterized Wednesday's surge as "all or nothing from any angle" and attributed it to a mix of "low float, automated momentum trading, and runaway speculation".

He said that it no longer made sense to continue tracking the stock and announced he would cease coverage.

Founded in 2015, Allbirds made its name with eco-friendly and merino wool shoes. By the time of its IPO in 2021, it was valued as high as $4 billion.

But within a few short years, competition intensified and sales were slashed. Allbirds' stock has lost about 96% of its value. This sudden announcement of an AI infrastructure pivot was seen by the market as a survival-driven rebranding.

AI Concept Becomes "Traffic Code", Small Caps Flock to the Trend

Allbirds isn't the only company this week to see its stock boosted by pivoting to the AI concept.

Social media company Myseum announced it was changing its name to Myseum.AI and shifting its business focus to AI. On Thursday, it once soared more than 250%, but even then, its total market cap after the close was only $10 million.

Adam Sarhan said:

With the risk of sharp pullback and short squeeze pressure coexisting, there’s no reason to get involved in trades like this.

Similar rallies have appeared before on Wall Street. Besides the GameStop and AMC "retail short squeeze" events during the pandemic, companies such as CaliberCos and Eightco also once saw their stocks spike sharply in the short term after announcing cryptocurrency-related initiatives.

For investors, this episode suggests that in AI concept-driven rallies, sentiment-driven short-term volatility often lacks fundamental support, and following the crowd can come at an extremely high cost.

Risk warning and disclaimerThe market has risks, and investment needs caution. This article does not constitute individual investment advice and does not take into account the individual investment goals, financial situation or needs of any user. Users should consider whether any opinions, views, or conclusions in this article suit their specific circumstances. Investments made accordingly are at your own risk. ```