The struggling footwear company Allbirds is attempting a radical transformation into an AI compute provider, but faces significant challenges including a severe funding shortfall, a lack of physical assets, and untested leadership in the new field. The company, which intends to rename itself NewBird AI, sold its shoe business and IP for $39 million and recently raised $50 million in convertible notes to purchase graphics processing units (GPUs).
Industry experts say this capital is insufficient to compete. Rival firm CoreWeave, a leader in the 'neocloud' sector Allbirds aims to join, plans to spend $30 to $35 billion this year alone on capacity. "To run institutional grade compute clusters it can be in the order of a couple hundred, a few hundred million, at least," said Warren Hosseinion of GPU investor Compute Labs.
Securing Contracts and Credibility
A critical first step for Allbirds will be securing anchor contracts with major tech firms like Amazon, Google, Meta, or Microsoft. Such agreements could then be used to secure further financing for more GPUs. However, persuading both partners and investors of its long-term commitment is seen as a major hurdle.
"If you can pass the underwriting diligence…that will be their biggest hurdle," Hosseinion told Business Insider. One potential shortcut, suggested by AI Squared CEO Darren Kimura, would be to acquire a private company already operating in the AI infrastructure space, thereby gaining immediate expertise and a publicly-traded vehicle for raising capital.
Leadership and Execution Challenges
Box: What is a Neocloud? A neocloud company specialises in providing high-performance computing power, primarily using Nvidia GPUs, to train and run complex artificial intelligence models, offering an alternative to traditional cloud providers.
The company's current leadership lacks direct experience in the AI infrastructure sector, which requires expertise in energy, politics, and data centre operations. CEO Joe Vernachio, who succeeded founder Joey Zwillinger in 2024, has a background in retail apparel, having led turnarounds at Mountain Hardwear and held roles at The North Face and Spyder.
CFO Annie Mitchell previously worked at Gymshark and Adidas. Both executives are due retention bonuses if they stay through the final sale of the shoe business, expected in Q2 2025, but their long-term plans are unclear. Paul Calatayud, founder of data centre developer VoltScape, emphasised that "somewhere in between there has to be a group that knows how to handle running a data centre."
A High-Stakes Proof of Concept
Despite the challenges, the $50 million in financing could be enough to begin a proof of concept, according to Kimura. This would involve hiring a specialised management team, acquiring an initial batch of chips, and demonstrating a working business model to attract further investment.
"You could buy enough to get going, and use that as an example to demonstrate the model working, and then build it out," he said. The success of this desperate pivot will determine whether the former shoe brand can survive in the brutally competitive and capital-intensive world of AI infrastructure.