>These funds buy based on market cap of the stock.

There might potentially be a problem if ETFs owned the entire market, but owning half the market cap still allows for market pricing of the other half. I don't see that you are pointing out a problem?

The market put a price on NKLA, and you are simply claiming that you know better than the market (to hell with the wisdom of crowds); such beliefs are generally unfounded. One example does not tell a convincing story, do you have a portfolio of disbelief that you have tracked the performance of?