Chamath Palihapitiya Says the AI Boom May Be Hiding Biggest Capital Allocation Mistake in History

Rich Duprey

Sun, July 12, 2026 astatine 9:43 AM CDT 5 min read

Quick Read

• Palihapitiya argues conscionable 0-2% of the S&P 493's caller net maturation stems from AI productivity, with ostentation and buybacks driving the rest.

• A PwC 2026 survey recovered 56% of CEOs saw nary AI gross oregon outgo benefit, portion lone 12% gained some outcomes simultaneously.

• AI adopters indispensable present beryllium the exertion generates returns supra the risk-free complaint oregon warrant wherefore currency wasn't near connected the equilibrium sheet.

• This lithium shaper surpassed a $1B backstage valuation, joining immoderate of America's astir almighty startups. Now you tin put successful EnergyX alongside planetary giants similar General Motors, but lone done July 16. (sponsor)

Artificial quality has wholly changed the communicative for this decade. Hyperscalers proceed committing hundreds of billions of dollars to information centers, Nvidia (NASDAQ:NVDA) can't manufacture AI chips accelerated capable to fulfill demand, and companies crossed astir each manufacture are racing to deploy generative AI. 

Investors person rewarded those gathering the infrastructure. Yet infrastructure spending is lone fractional the story. The harder question is whether the companies buying AI are generating capable fiscal returns to warrant the investment. According to task capitalist Chamath Palihapitiya, that reply whitethorn soon find the adjacent signifier of the AI boom.

The Productivity Numbers Aren't Matching the Spending

During a caller occurrence of the All-In podcast, Palihapitiya argued that the AI return-on-investment chickens are yet coming location to roost. His constituent wasn't that AI has failed. Rather, helium challenged investors to abstracted the companies selling AI from those buying it.

Excluding Nvidia, the unreality providers, semiconductor instrumentality manufacturers, and different AI infrastructure leaders, if you analyse what the remainder of firm America has really earned from its AI investments, you find a wholly antithetic situation.

The S&P 493 -- the S&P 500 excluding the largest exertion companies driving the AI roar -- has produced astir 9% earnings-per-share maturation since generative AI entered the mainstream. Yet Palihapitiya believes lone astir 0% to 2% of that maturation stems from AI-driven productivity. The remainder reflects inflation-driven pricing powerfulness and assertive stock buybacks alternatively than genuine operating improvements.

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