Chamath Palihapitiya blames the Fed for ‘perverted’ market conditions that benefitted him
Chamath Palihapitiya
Olivia Michael | CNBC
Billionaire investor and so-called SPAC King Chamath Palihapitiya said the zero interest rates the Federal Reserve allowed to persist for years created the “perverted” market conditions he benefited from at the height of the pandemic.
Speaking with Axios’ Dan Primack at an event on Wednesday, Palihapitiya explained what he felt contributed to the rapid rise and collapse of the SPAC market, the shorthand for special purpose acquisition companies, which created a way for young companies to go public without some of the usual IPO hurdles. SPACs, which grew in popularity in the first two years of the pandemic, have seen a reset amid economic and regulatory headwinds. Still, there are more than 450 deals on the market for a merger target ahead of 2023 deadlines, according to SPAC Research.
The former Facebook executive and CEO of Social Capital has helped several companies go public via SPAC, including Virgin Galactic, from which he later sold his personal stake before stepping down from the board. Earlier this month he closed two SPACs after failing to find merger targets in time.
“We are learning what went wrong, which is that we had a decade-plus of zero interest rates,” Palihapitiya said of the market. “That is what fundamentally was wrong. It perverted the market. It distorted reality. It allowed manias and asset bubbles to build in every single part of the economy.”
Low interest rates mean lower returns on savings accounts, which can encourage more spending in the economy, which can be a boon for high-growth assets.
Palihapitiya said the “free money” given by the central bank resulted in a “misallocation of risk,” which led many people to misprice the risk of their investments.
Still, Palihapitiya pushed back on the idea that SPACs were hit harder than other assets, including tech stocks.
“When you provide free money into a system, manias will build and these manias are broad-based,” he said. “And now that we’ve taken money out of the system, these manias will end, and you will find the market-clearing price for a lot of securities. And I think that that’s a healthy process. But I think it’s unfair to just look at one asset class.”
Now that interest rates are rising again, Palihapitiya said, “The biggest thing that I learned was how much of my early success was probably not attributable to myself. So on the same way that I sort of blame Jay Powell for zero interest rates, I think I massively benefitted from Powell, and Bernanke and Janet Yellen before,” he said, referencing past Fed chairs.
“We have actually had a massive tailwind because we had a zero interest rate environment that allowed us to raise unbelievable amounts of money from investors who frankly had very few other alternatives because interest rates were zero,” he said. “And what it allowed us to do was crowd into companies. Many of those companies had unbelievable valuations. Eventually these unprofitable businesses went public and only now are we starting to sort out what are good and what are not so good businesses.”
-CNBC’s Yun Li contributed to this report.
WATCH: Chamath Palihapitiya unwinds two SPACs, cites high valuations and market volatility
U.S. President Donald Trump speaks to reporters near Air Force One at the the Lehigh Valley International Airport on August 03, 2025 in Allentown, Pennsylvania.
Anna Moneymaker | Getty Images
After months of speculation, U.S. President Donald Trump has divulged more of his semiconductor tariff plans, but his latest threats might raise more questions than answers.
On Wednesday, Trump said he will impose a 100% tariff on imports of semiconductors and chips, but not for companies that are “building in the United States.”
As semiconductors represent an over $600 billion industry at the heart of the modern digital economy, any potential tariffs hold massive weight.
However, experts say the President has yet to provide key details on the policy, which will ultimately determine their full impact and targets.
“It’s still too early to pin down the impact of the tariffs on the semiconductor sector,” Ray Wang, research director of semiconductors, supply chain and emerging technology at The Futurum Group, told CNBC.
“The final rule is likely still being drafted and the technical details are far from clear at this point.”
Big players win?
One of the biggest questions for chip players and investors will be how much manufacturing a company needs to commit to the U.S. to qualify for the tariff exemption.
The U.S. has been working to onshore its semiconductor supply chain for many years now. Since 2020, the world’s largest semiconductor companies such as TSMC and Samsung Electronics have committed hundreds of billions of dollars to building plants in the U.S.
Speaking to CNBC’s “Squawk Box Asia” on Thursday, James Sullivan, Managing Director and Head of Asia Pacific Equity Research at J.P. Morgan, said this could mean most major chip manufacturers receiving exemptions.
If this is the case, the policy could have the effect of “continuing to consolidate market share amongst the largest cap players in the space,” Sullivan said.
Indeed, shares of major Asian chip companies like TSMC, which has significant investments in the U.S., rose in Thursday morning trading following Trump’s announcement. Early this year, TSMC announced it would expand its investments in the U.S. to $165 billion.
Shares of South Korea’s Samsung and SK Hynix — which have also invested in the U.S. — were also trading up after a Korean trade envoy reportedly said on radio that the duo would be exempt from the 100% tariffs.
An exemption on what?
Beyond the question of exemptions, many other aspects of the potential tariffs remain unclear.
Speaking on CNBC’s “Squawk Box Asia,” on Thursday, Stacy Rasgon, senior U.S. semiconductor analyst at Bernstein, noted that most of the semiconductors that enter the U.S. come inside consumer goods such as smartphones, PCs and cars.
For example, in 2024, the U.S. imported $46.3 billion of semiconductors — only about 1% of all U.S. imports, according to the Information Technology and Innovation Foundation.
While Rasgon said tariffs on these imports may be manageable, broader tariffs would be harder to deal with.
“What we don’t know with [Trump’s] comments on tariffs, is it just raw semiconductors? Are there going to be tariffs on end devices? Are you going to be looking at tariffs on components within end devices?,” Rasgon asked.
The confusion and questions around semiconductor tariffs were brought to the forefront after the U.S. Department of Commerce started a national security investigation of semiconductor imports in April, just as the sector was exempted from Trump’s “reciprocal” tariffs.
The vague language from the Trump administration — though not invoked in the president’s latest proclamations — could theoretically be used to apply broad tariffs to an enormous segment of the electronics supply chain. It’s also unclear on the extent that semiconductor materials and manufacturing equipment used to manufacture chips would fall under the tariffs.
Complex supply chains
Potential tariff strategies could also be complicated by the intricate and interdependent nature of the semiconductor supply chain.
Rasgon gave the example of American chip designer Qualcomm, which sends their designs to TSMC to be manufactured in Taiwan and then imported to the U.S.
“Does that mean those [chip imports] would not be tariffed, because they’re made at TSMC, and TSMC is building in the U.S.?… I don’t know. Hopefully that’s how it would be,” he said.
Another large buyer of semiconductors in the U.S. are cloud service providers like Amazon Web Services and Google, which are essential to power Washington’s AI plans.
According to a recent report from ITIF, semiconductors contribute $7 trillion in global economic activity annually by underpinning a range of downstream applications including AI and “big data.”
In a potential sign of American companies seeking to move their chip supply chains into the U.S., Apple CEO Tim Cook, alongside Trump at the White house Wednesday, announced that it will be supplied chips from Samsung’s production plant in Texas.
The company also announced an additional $100 billion in U.S. investments, raising its total investment commitments in the country to $600 billion over the next four years.
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The Blue Ghost Mission Operations Engineer, Jaxon Liebeck, showcases the Blue Ghost moon lander at Firefly Aerospace headquarters on Tuesday, Dec. 3, 2024 in Cedar Park.
Houston Chronicle/hearst Newspapers | Hearst Newspapers | Getty Images
Firefly Aerospace priced shares in its IPO at $45 on Wednesday, above its expected range.
The Texas-based rocket maker will debut on the Nasdaq Thursday under the ticker symbol “FLY.” The offering raised $868 million and values the company at about $6.3 billion.
Firefly filed its initial prospectus in July and upped its IPO range this week to $41 to $43 a share, from an initial range of $35 to $39.
The space technology sector has seen rising investor interest over the last few years as billionaire investors such as Elon Musk and Jeff Bezos put their money behind SpaceX and Blue Origin, respectively.
So far this year, space technology companies Voyager Technology and Karman Holdings have gone public.
The broader IPO landscape has also seen major public debuts this year from Figma, CoreWeave and Circle as the market for public offerings reopens following a prolonged drought.
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