Social Capital founder and CEO Chamath Palihapitiya told CNBC on Tuesday he's "massively long" Tesla convertible bonds.

"Why the convertible bonds? Again, it's the safest and surest way to bet on Elon Musk, who I just fundamentally think is the most important entrepreneur of our generation," said Palihapitiya, whose firm has $2.6 billion in assets under management.

Palihapitiya said he's known the Tesla CEO for a long time. Musk is "truly putting every single dollar where his mouth is," he said.

"The guy is trying to make us an interplanetary species, get us off of oil, reduce traffic. And this is where I don't understand when like people like [Jim] Chanos come out and say you know, this company is a fraud," Palihapitiya told "Squawk Box."

Short-seller Chanos of Kynikos Associates, who is betting against Tesla, has called the company "a cult stock" and questioned its profitability.

"I don't understand what he's talking about," Palihapitiya said. "There's nothing fraudulent about this guy. There's nothing fraudulent about the technology. This is just like people wanting to dance on failure, and I just don't get it."

Tesla shares opened 1.5 percent higher Tuesday and have risen more than 53 percent this year.