FT analysis finds AI rebrands rarely keep share price gains

In short: Many companies that rebranded themselves around AI saw a quick jump in value, but most did not keep those gains.

What's going on

Dozens of US-listed companies have tried to link themselves to artificial intelligence by changing their names or saying they are shifting into AI. The Financial Times found at least 27 companies have done this since 2023, across industries ranging from cancer treatment to gold mining.

One of the biggest examples is Allbirds, a sports shoe company, which changed its name to Smartbird last month. The company says it is moving away from footwear and toward selling high-end servers, which are powerful computers used in data centers (large buildings full of computers), and these servers include AI chips.

The FT analysis found that these announcements often lead to an immediate stock market pop. At their peak after rebranding, the companies studied had a combined market value that was $8.7bn higher, up 106% compared with the week before their announcements. But by the end of last month, more than half of those gains had disappeared, and seven companies were worth less than before the rebrand.

A portfolio manager at Acadian Asset Management, Owen Lamont, said these name changes may be aimed at retail investors, meaning everyday people who trade stocks, often through apps and influenced by social media.

What to watch

US regulators are paying closer attention to what the SEC calls “AI washing”, when firms suggest they have AI capabilities they do not really have. Lawyers say adding “AI” to a name can draw scrutiny if it implies products or skills that are not real. For investors, the key question is whether a company is actually building and selling something new, or just putting a trendy label on the same business (like repainting a shop sign without changing what is inside).

Source: Financial Times