Today on Squawk Pod, we're going all in with Chamath Palihapitiya. First, a sea change in technology companies value.
If two or three companies are going to generate 2, 3, 400 billion a year and it's doubling and tripling every year, where is the rest of this money going to be made?
The AI optimists versus the doom and gloomers. What Chamath has to say about Anthropic's Dario Amodei. Let him scream in the sandbox about how the sky is falling. Let him do it. What I and many other people will tell you after decades of being in this industry, the sky is not falling. Plus, the evolution of the investor. The SPAC king admits his incentives were misaligned in the SPAC boom of 2021. And once a donor to the Democratic party, Palihapitiya has had a change of heart and wallet when it comes to President Trump. He's fantastic, great person, unbelievable person, very smart on top of it, open-minded. The California billionaire on California billionaires, our own Robert Frank joins the conversation.
The total billionaire wealth in California is about $2 trillion. Six people account for more than half of that.
The state of California will accomplish nothing.
It is a very busy Tuesday, July 14th, 2026. A supersized Squawk Pod begins right now.
Good morning and welcome to Squawk Box right here on CNBC. We're live at the NASDAQ market site in Times Square. I'm Andrew Ross Sorkin along with Joe Kernan. Becky is on assignment this morning, but we've got a lot going on this morning.
There's somebody else here, but first we're going to talk about the future.
Today on the podcast, a fresh headline that starts off our discussion with venture capitalist Chamath Palihapitiya and underscores the speed at which the AI revolution is upending the status quo. IBM shares plunged double digits early this morning after the legacy American technology company, once known as Big Blue, released preliminary second quarter results that fell way short of expectations due to weakness in the software and infrastructure business. Why? Demand for memory chips that power artificial intelligence. Our Joe Kernan noted the stock slide this morning in a market discussion with CNBC contributor Stephanie Link and that's where we'll start. I think it's going to increase going forward.
Sorry, sorry to interrupt, but IBM it's not may not be what it used to be in terms of bellwethers, but when you get a $40 move on a warning, when's all that companies haven't warned lately? Yeah, they warn of better than expected results in this new world, but IBM is warning and it's had a big runup which it hasn't had in a while. But it is down today. There is a letter from the CEO to investors and the company sees second quarter revenue $17.22 billion. Software revenue up 5%. Consulting revenue flat and adjusted earnings per share of $2.93. And infrastructure revenue actually down 7%. Also gross margins down 70 basis points. What do you think, Steph?
Well, I own it, so I'm not happy about it. And it's a shock. So this now means it probably reinforces that AI and what is it doing to software? And that's the scare that people have had and that's one of the reasons why software in general hasn't done so well. Software at 5% I mean oh my goodness it was supposed to be at least double digits maybe even into the teens. And so that's very disappointing.
Do you need to go somewhere and have a drink or cry or something or you want to continue along with the
Needs to buy some tokens.
Yeah. I'm worried about you Steph. I know it's a sore subject, but IBM expected second quarter infrastructure revenue decline played out worse than our expectations, Steph. So that just hit as well. Do you think and we're going to ask Chamath this in a second. Do you think that this puts a question mark over AI in the building or it just basically says yeah software is going to be disintermediated or something because of AI? So, is it a negative for AI or it's just what we already knew was going to happen?
Well, I think it's coming to pass that AI is having an impact on software. I think that's exactly the issue. This is what we've been nervous about for a while and it's coming to unfortunately into fruition. I will say I mean this is an amazing CEO. He has done an incredible job at turning this company around, but the bulk of their profits are software. So if they're guiding down, obviously they're getting impacted. It says that a couple of or several deals failed to close in the quarter. So we have to get more color on that as well. But this has been a good stock under Arvind Krishna and
Yeah, the miss is definitely Steph. The miss is definitely where you're pointing to because $2.93 is off of $3.01 was the estimate for adjusted earnings and then a little bit lower on revenue $17.2 versus an estimate of $17.8. So that's below but I think you can go cry on your beer. Well, not your beer, cry on your coffee and we're going to get to Chamath. Thanks Steph.
Okay. We want to bring in our special guest this morning. He is sitting on set watching all of this play out. Hasn't been here in a bit and we're thrilled to have him back. Chamath Palihapitiya is here. He's the founder and CEO of Social Capital, CEO of 8090 and host of course of the All-In podcast. And Mr. You're wearing a suit no less and
For us it's my entire job is selling enterprise software. That's what I do.
That's what you do. So let actually before we get into anything and I want to get into all what's happening in the valley, AI, everything, we're going to go back in time, talk SPACs because people have asked, I know your favorite topics, but just your take on the IBM situation to the extent that you think it has ramifications in any larger way or maybe it's just specific to IBM.
I think the thing that we know is there are a handful of companies that are compounding revenue a billion dollars a day and at some point the downstream ecosystem has to make money as well. And then the ultimate buyer of these tokens also has to make money. And so at some point the question has to be asked if two or three companies are going to generate two, three, 400 billion a year and it's doubling and tripling every year. Where is the rest of this money going to be made and who's implementing it in such a way where these profits are to be had and I think you're starting to see a little bit of the wheels come off just at a very basic level.
If you think AI is like oil, let's just use this analogy to make it simple. A barrel of crude is what $86 bucks right now. Right now, unfortunately, it's gone up. Yes.
WTI is 81. 81. Okay. Let's say a barrel of intelligence, which is a million tokens. Okay.
You can buy that barrel for $26 from Anthropic's really good model. You can buy from OpenAI for $26. Anthropic's latest model cost you $56. Elon is selling you a barrel of intelligence for a buck. Zuck is about to sell it to you for a buck 50. Demis and Sundar are trying to sell it to you for a dollar. The Chinese will sell it to you for 50 cents. So this rationalization has to happen. We have the same input that has this crazy cost. If you've made a bet very early around one of these folks that are selling extremely expensive barrels of intelligence and you try to pass through the cost, you may run into some downstream difficulty and that has to play itself out.
And you think that's playing itself out in the IBM story or you're saying that's just a broader
That's just a broader comment. I think that Arvind has done a great job. I mean, look, it's undeniable the trajectory of the business and he's been able to pivot it and orient it around cloud, right? And I think he deserves a lot of credit for that. But the reality is everybody that's in this ecosystem, me included, we're all struggling to figure out how do we price this stuff so that the ultimate buyer is making more money, is growing faster, and that is still a question mark. I think you're getting to a point that Alex Karp, who was just here about a week and a half ago, was making about the sort of token maxing conceit, which is that some of these companies are, this is to the Anthropic OpenAI piece of it, where you have CEOs, and I've now talked to them too, who say the math is not math. The CEOs and the CFOs, in my opinion, probably have no idea how much token maxing is going on inside of their organizations. I suspect what'll happen is one day you're going to have a miss and EPS will be off by a few pennies and the CEO will say to the CFO, 'What happened? Where did all of this incremental opex come from?' And they'll trace it to the $50 barrel of intelligence versus the $1 or 50 cent barrel of intelligence. That hasn't happened yet.
This is interesting. There's a software stock. What is also interesting? So, it's a Dow component, IBM. So, the Dow's down 500 points. Do the math. 50 points times whatever the divisor is. The NASDAQ was up more than 100. It is still. So if it is a question mark about technology in general, you're not seeing it yet in the NASDAQ and that big 500 point drop in the Dow is because
Well I think in fairness the NASDAQ has a lot of other stuff which is
All the hardware, all the memory, all the chips. That entire complex is still going to make a ton of money, right?
The question is again eventually
If you buy oil you need to put it into a new engine. That engine has to make you go faster, right? It has to
It sounds like you're suggesting that the LLM complex at the high end, which basically is Anthropic and OpenAI in terms of the pricing of whatever that is, and that's still in the private markets, is going to break. Is that what you're trying to suggest?
I think that's what you're trying to get me to suggest. Let me be very clear. The hardware and memory complex is going to run for another couple of years because there are enormous constraints in that ecosystem. So, there's tremendous scarcity. Those things are going to continue to do well, NASDAQ will probably overperform the S&P.
Okay. If you look at the only other pocket where there's true growth, it's the LLM complex as you said. I don't know what the long-term valuation is, but if you see a bunch of public companies in the next few quarters miss because of an opex miss, right?
And they trace that back to runaway spending that they didn't know existed inside of their organization, you're going to take a little bit of the error out of that specific.
So, okay. So we just talked about four of the big model makers, maybe five of the model makers. We talked about OpenAI, Anthropic, you mentioned Gemini, we talked about Grok, and we talked about Meta. How do you see them all stacking up longer term?
I think that you're seeing a convergence. It used to be the case that when a model dropped, it was so superior to everything else. You're like, 'Oh my god, we went from kerosene to jet A, right? To jet fuel. So, of course, I'm going to go to jet fuel instead. I think the analogy now is we've seen the nth version of the iPhone. We've all kept upgrading to it. We're still using it for roughly the same behaviors. My elbow hurts. What should I do? And you're wondering to yourself, well, why am I spending all of this money? And I think that's where we are today. So, if you're going to direct all of this behavior, why don't just spend 50 cents or a dollar? That's a pretty rational.
So, but then the question is, is the Meta model for example or Grok as good as or close enough of an approximation for whatever you think you need to get done using
For most use cases, the answer is a screaming yes. For some very narrow use cases, no. But in those narrow use cases, I would say spend the $50 barrel of oil. Spend it. It makes sense. If you're a cyber security company, if you're Palo Alto Networks and you can book billions of dollars of more incremental revenue by locking down all the infrastructure of big companies, use Fable. But the freakout over the weekend even inside of Anthropic, you know, we talked about it yesterday morning. Anthropic, as you know, was planning to end the sort of free use of Fable for some of the paid users, sort of end that extension so that you'd actually have to upgrade or pay more to get access. We can't afford to. And then all of a sudden they say to themselves, can't afford to do it. We can't afford to do it because if we do, people will cancel their subscription and go to OpenAI. Exactly. And the OpenAI model is excellent. So is excellent. Right? Mythos Fable, it's excellent when you can use it. So all of these folks are hitting the same constraint. They're massively power constrained. They're massively data center constrained. And so they are usage constrained. Meanwhile, the guys that have all of that capacity, Google, SpaceX, and Meta are finally getting their footing and they're starting to consistently release model after model after model. 80 to 95% is good. It's a very complicated dynamic for the leading labs.
Do you see a shift by the way? You know, there was, for a long time, OpenAI and Sam were sort of under a lot of fire. There was big questions about trust and the like and by the way maybe even more questions given this Apple situation on Friday. But there seems to be some dings taking place on the Anthropic side too. And this maybe gets to the Alex Karp thing, but people who believe that either the spending part, the math doesn't make sense of what's happening or you look at the Figma story, for example, of them going into different businesses.
Really concerning. I mean, look, let's be clear. There are three leaders of lab companies who have been in the spotlight for 20 years. Elon, you've seen every facet of his personality, and you can judge over 20 years of behavior. Sundar and Demis 20 years. Zuck 20 years and I think those folks have shown that they basically run a relatively straightforward well understood business, right? There aren't any rugpulling situations. Maybe Facebook had them in the past. I think they've cleaned that up. Okay. But Google certainly never has and Elon never has. You may dislike them for other things. And then all of a sudden you have these two guys who are incredible entrepreneurs clearly, but the amount of collectible data that you can look at, behavioral instances where they've had to make hard decisions are still relatively limited because they're only a few years into being this public and being this scrutinized. So if you look at the first few years of Facebook, messy. I don't know about Google. Maybe the first few years
We would talk about you in your 20 years you're going to get to talk about I
I mean you know like I was caricatured as the guy at Facebook that made everybody cry but then you look back it's a $2 trillion dollar company so the tears are crocodile tears.
IBM is saying that you know we just missed closing a couple of big deals that that's they always say things like that but this is interesting the clients that they were trying to close were distracted by industrywide cyber security concerns. And the stuff that they
If you believe that if you have somebody
That now they're going to say the weather was
No, I have a real issue with this and I've said this a couple times so I'll just say it again. You can look at a graph of the financing needs of these companies, right? And you can pinpoint when they oscillate between two different messages. Message one, we've created a super god which then the VCs are like lemmings. They run and they're like, 'Well, I need to be on the right side of the super god.' And then they flip to other two, which is this is a complete weapon. Let's shut the world down and why don't you regulate everything? They just go back and forth. We've had this game. Now, the problem is at the scale of a trillion dollars of market cap. That game has these ripple effects that touch everybody in the industry. This is why, by the way, I think what Alex Karp did, he deserves a medal. This is an incredible human being who had the courage to come here. Everybody watched that clip. All these S&P 500 CEOs called me after that clip saying, 'Help me interpret this.' And I'll tell you, he was on the right side of history because what he's showing you is that hold on a second. You need to have a much more predictable way of running your business because if you are bending to the vicissitudes of private company funding cycles or private companies desire to need to live up to trillion dollar valuations, you're taking a level of risk that you probably didn't know you were taking. That's a fair critique, I think.
We got to take a pause for a second. Just one last question related to because it's on the Alex Karp topic. Effectively what he's saying is that Palantir needs you are going to need some kind of layer though in the middle.
Partially to protect you I mean he was arguing in some ways from the LLMs ultimately.
Here's the thing. The LLMs do a very good job of a very superficial form of privacy called zero data retention. ZDR. That's the term that they use. And they say enable this and everything's hunky dory and everything's okay. But when you look at the fine print, let's just say Joe puts in the secret formula for Kentucky Fried Chicken into the model and say, 'Help me optimize it.' That part is ZDR'd. But then if you look at a little thing like if he just clicks the like button, is there any guarantee that that information is not stored somehow that he liked this kind of a thing? And the honest answer technically is no because we don't know how to do that. The other interesting thing that I would point out to you is that when Alex came on, I think he said something extremely legitimate. I think it applies to companies. It also applies to countries. These people are livid. They're like, I am paying for tokens that create no value. These people are stealing the weights and alpha of my business and they're creating a wealth tax that does not help the poor. It just punishes starts with the billionaires. Every single person at this table is going to be paying a wealth tax only to punish us. And the reason for it is because these models have been completely over irresponsibly oversold. And the sale is it's dangerous for everyone. Which is why I can give it to all your adversaries, but I can't give it to the Department of War or I can't safely give it to an enterprise in this country without being certain that the alpha that business could transfer to this model tomorrow. And at no point did Anthropic say, you know what, he's got it totally wrong. Here's the exact technical details and so there's nothing to see here. And I thought to myself, why wouldn't you the minute after that clip started to go viral, right? Be completely specific and repudiate the claim. And I think it's funny that we're here 10 days later and not a word has been uttered other than Alex's version, which the reason is because we all know is the true version.
You know, I've noticed, and it's funny you said chicken because I've asked multiple times how long to sear. I do a reverse sear on chicken on the grill.
I'm a reverse sear guy, too.
Are you a reverse guy on the cool beef? I don't like chicken. I like
But on the cool zone I and I've gone back to Claude and asked and he goes, you know, last time I and I'm like, what do you mean last? He does remember. Well, that's the consumer version. The enterprise version. My point is in the enterprise version, they do flush the recipe. I want to be clear. Anthropic is very good about that. So is OpenAI, but there's certain things that they these little there's all of these little leaks.
Do I have to pay tokens to get the good stuff that he has? Is that what we're See, I haven't paid.
I pay you. I pay through the nose.
Coming up on Squawk Pod more with Chamath Palihapitiya. The billionaire is a longtime California resident through his Democratic donor days all the way to his current more conservative standing.
I will not leave and I will keep building companies there and hiring people there and you know if there's taxes that I have to pay I'll pay these taxes but I just think that at some point we're better off addressing the core issue of why people believe this form of governance actually makes sense.
Plus looking back on the not so great track record for the famed king of SPACs. That's a fair critique, but it's also pretty rich for folks to just sit and chirp on the sideline. Welcome back to Squawk Pod from CNBC. Today with Joe Kernan, Andrew Ross Sorkin, and special guest Chamath Palihapitiya.
We are still here with Chamath Palihapitiya, founder and CEO of Social Capital, CEO of 8090, host of the All-In podcast, and we haven't seen him in a while. We used to see you quite a bunch.
My own distribution. I know I had to build my own distribution.
I know you've got your own distribution now, but you did come on a whole bunch during the SPAC craze.
I didn't have my own distribution then.
And I want to ask you this or maybe I want to read you this. We got a whole bunch of people tweeting at us. Pretty rich that Chamath has an issue with the game when he was the SPAC King and playing the game. So, I'm curious when you go back and think about
What does that mean? What do they mean when they say that?
I think what they're saying is there was a period of time where you sold a lot of SPACs and
I didn't. No, no, no. Let's
Promoted a lot of SPACs as the partner in a whole bunch of SPAC projects and in truth was that a lot of those SPACs ultimately didn't work for
Hold on. No, no, no. They did not work for speculators, but they worked for the CEOs and they worked for the employees. They worked for the customers of those companies. I mean, like I think
But for the investor class that was buying on the other end.
Hold on. Let's not call them an investor class. Okay. There were a ton of well-heeled hedge funds that were my partners. They made money. Who didn't make money? Speculators. Now, do I feel bad for them? Yes. Were my incentives misaligned with them also? We used to debate this. Yeah. But those are and I can evolve and see and I can say that's a fair critique. But it's also pretty rich for folks to just sit and chirp on the sideline without saying, well, how much money did those companies raise? The answer is tens of billions of dollars. How many clients or patients or customers do they serve? The answer is millions to tens of millions. How have they grown revenues and traction since that happened? And the answer is in some cases doubling and tripling. So if you want to take a fair look at it from a 360° view, there were some parts of it that worked and the part that didn't work, I went out of my way to relaunch a SPAC just to show you how I can address the speculator class because it always worked for I think for the entrepreneur.
Well, there's no question that the SPAC process was good typically for the entrepreneur and invariably maybe even good for the company and employees. I'm not arguing about that. I'm arguing that and I think anyone who was watching at some points when we used to talk about these things
I completely agree with the point. I agree with that.
And they would say look didn't work for them. You told me this was going to be a great thing.
It may not work again. By the way, it may not work again. But at least this time, the way that I structured this second time, let me maybe just take a step back and talk about why do I do this? I'm running a tech company. I don't need to do it. Why do I do it? I think the through line for me is I don't like it when I see markets that are gatekept by a few people. I don't like it. It bothers me. And my entire working career, if you actually say what's the through line from Facebook to now, I tend to go after markets that need democratization. Whatever. That's an overused jargony term, but Facebook was democratizing information. Social Capital, I democratized a lot of investment. Okay. The SPAC was I didn't like the idea that two or three banks sat as the gatekeeper between companies that should be funded and exist and their ability to actually serve customers. Because what happens is, and you can see it in these banks earnings, and I'm not saying they're doing anything wrong. They're doing something totally legitimate and right. But at the end of the day, those folks structure liquidity for companies based on their ability to embed gains to their best customers. That's the game. So if you hear that OpenAI cannot go public this year, that is nothing to do with OpenAI. That is everything to do with who is lead left and who is lead right deciding how much embedded gain they can transfer to their best clients. My point of view is find a different way. There are many different ways. Direct listings are a way. SPACs are a way. Reverse mergers.
But if you could go back in time,
Do you think you would have done the SPACs again the way you did them?
The thing that I would have changed is I would have had near a comment on Twitter, I would have not come on CNBC and talked about them at all. That was a huge mistake. And at the time I think I was also learning about the influence that I had and I was kind of learning to deal with it. I think six years later, seven years later, the 2021 me versus the 2026 me, the 2026 version of me would say, 'We don't need to say that. We don't need to say anything.' In fact, let's just be very clear. Everybody stay away. I'm doing this because I have two very specific goals. One is I want
And you're talking about your current project.
Yeah. Well the SPAC that I did now has two very specific goals. One is just to create an architecture that I hope people copy which is you cannot get paid unless the stock goes up over time. Set huge goals in the out years for performance. So now there's complete alignment. And the second
Yeah. And the second which is much more practical is I look at the United States and there are these huge gaping holes where companies need capital to do very important things for the United States that they will not be able to get because they do not check the obvious box for the gatekeeping banks. And unless you fix that problem you are going to have a serious problem on your hands.
But to it, it just sounded like you said, 'Look, I want to raise money for the companies and I want the hedge funds to do good and hey, these speculators, they're speculating and they lose their money all the time. They should just, you know, buyer beware. They should have known they were going to lose their money.' That's what it sounded like. You said
I think that I should have been much more circumspect and said nothing. Nothing. Right. And this time you'll hear me say nothing.
Was there a way that they could have gotten a fair shake along with the hedge funds and the companies?
I think that is again the structural things that need fixing. So the next version after this version that I would hope somebody does is they just post all their own money. So like right now the way that the SPAC works is that you post a little bit of it and you still need to raise from outsiders. But I've talked to Paul Atkins about this. I'll post the hundreds of millions of dollars. Now it's a turnkey IPO. It's all my risk. If I find something I like, I'll just underwrite it. I'm giving that company the hundreds of millions that they need and it should go public. That kind of stuff where there's all of these folks who could then do that and copy that. All the hedge funds could do it. All of the big buyside organizations could do it. That could be a really important thing for what we need to happen right now, which is more companies should be public, not less. And more money should go into critical infrastructure, not less. And right now if you put a handful of financially motivated actors in the middle of that you are going to see.
Should they go public earlier?
