The Short Version
It is technically possible to convert carbon from peanut butter into diamond under extreme laboratory pressure, as demonstrated by geophysicist Dan Frost at Germany's Bayerisches Geoinstitut. Diamond crystals did form before hydrogen released from the peanut butter destroyed the apparatus. However, this was a single, unreplicated demonstration — not a peer-reviewed or repeatable method. Established diamond synthesis uses pure carbon feedstocks, not complex organic mixtures. The claim is literally true but gives a misleadingly optimistic impression of feasibility.