Maybe We Can Talk About an AI Bubble Again

Maybe We Can Talk About an AI Bubble Again
Source: Bloomberg Business

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Here's what Tracy's thinking about...

Allbirds, the shoe company, announced this morning that it was rebranding to an AI compute company. Or as the statement put it, using classic Silicon Valley parlance, it is pivoting:

SAN FRANCISCO, April 15, 2026 (GLOBE NEWSWIRE) -- Following its prior announcement that it has entered into a definitive agreement to sell the Allbirds brand and footwear assets to American Exchange Group, which intends to continue to build on Allbirds' legacy and deliver compelling products to Allbirds' customers (the "Asset Sale"), Allbirds, Inc. (Nasdaq: BIRD) (the "Company") today announced the execution of a definitive agreement with an institutional investor for a $50 million convertible financing facility (the "Facility"). The Facility, which is expected to close during the second quarter of 2026, will enable the Company to pivot its business to AI compute infrastructure, with a long-term vision to become a fully integrated GPU-as-a-Service (GPUaaS) and AI-native cloud solutions provider. In connection with this pivot, the Company anticipates changing its name to "NewBird AI."

This is pretty crazy for a number of reasons. For a start, there's no obvious reason why the shell of a failed shoe company (Allbirds sold its actual shoe brand earlier this year) would be any good at 'GPU-as-a-Service.' Neither does there seem to be much ideological throughline between making sustainable shoes and diving headfirst into energy-intensive data centers. You also have to wonder what $50 million in financing actually buys you in terms of compute, and how exactly they'll compete with the hyperscalers, or specialist players like CoreWeave, Lambda, and so on.

I know Joe wrote earlier this week about how no one is talking about overcapacity in AI anymore, and yet, if one were looking for behavioral signs of a bubble, a wave of questionable corporate 'pivots' to compute would certainly be up there.

Market veterans will remember the infamous rebrandings during the dotcom bubble, when beleaguered industrial firms transformed themselves into internet plays, or more recently, during the erstwhile blockchain boom. Perhaps the most well-known example is Long Island Iced Tea, which in 2017 announced that it was renaming itself to Long Blockchain Corp. The stock initially soared, but the company was delisted a year or so later.

Just like we saw with Long Island Iced Tea, Allbirds shares are also up this morning -- jumping as much as 876% and currently trading at about 600+%.

The sneakers may be gone, but apparently a hot new narrative tread still has some grip on investors.

What Joe is thinking about today

There's something about AI that makes people want to take a side. I mean, in markets there are always going to be arguments about the potential size of an industry or company. And I suppose in technology, there have always been niche debates about, say, what type of protocol or format will win out (e.g. VHS or Beta).

But there's something about AI which is different. You have (unpaid) AI boosters, who go around and talk about how great the technology is, and how if you don't use it you're going to be left behind. And you have critics, who have all kinds of negative things to say about it, ranging from its environmental impact to hallucinations to a million other things.

Anyway, if you're hankering for a big serving of anti-AI red meat, then the latest piece from well-known critic Ed Zitron is a good one.

As a neutral, unbiased journalist, I obviously don't take a side. But the Zitron piece does bring up something which I don't think is discussed enough, which is that it's very hard to actually purchase (or subscribe to) a certain level of "intelligence" from the major AI labs.

In theory, intelligence (or something that vaguely resembles human intelligence) is now being sold as a commodity, kind of like the way electricity is sold. You can pay by usage (through an API) or via a fixed subscription fee, such as a Claude Max account that costs $200 a month.

But the problem is, the more people are using these services, the dumber they seem to get for any individual user. If you're on a subscription plan, then you hit your subscription limits faster. Or some combination of both. This is because compute is scarce and needs to be rationed.

This is a very odd situation, and I'm not sure there's an obvious parallel with past technologies. If the wheel is a productivity-enhancing technology and I use it myself, then your usage of the wheel doesn't degrade my experience. But at least in theory, we could find ourselves in a situation with AI where I get productivity-enhancing gains with the technology up until the moment that you start using it; then my model gets dumber (or becomes more scarce) in order to serve you as a customer and then it's no longer productivity-enhancing.

And it's not obvious whether there's an escape for this treadmill. When Mythos eventually is more available to the public, it will presumably see voracious demand from cybersecurity professionals because there's so much hype about its bug-finding capabilities. But then as more people use it, does it get worse at finding bugs? It's possible. And then what? Do companies spend even more to compensate for degraded capability? And does that degrade the capabilities even further?

I don't think anyone should feel too confident about the effect that AI will have on the economy. It's a very weird new thing, and it's very difficult to imagine what a stable equilibrium looks like given the rapid changes to the technology itself and the conditions described above.

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