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Yes, the title of this article is a bit provocative.
But some seriously smart people agree with the idea that the market is becoming less efficient over time.
Let's dive into the evidence, and what that means for investors.
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Let’s start very quickly with what we typically mean by ‘markets are efficient’.
The Efficient Market Hypothesis (EMH) is the idea that a stock’s current price always reflects all available information in the world right now.
Because everyone has access to the same news and data, stock prices instantly adjust to reflect it.
That means that stocks are always correctly priced - if a stock were a good deal, investors would have already bought it and driven the price up.
Is the market really less efficient?
The efficient market hypothesis is difficult to test.
On the surface, it does make some sense that asset prices would reflect all the available information.
But the hypothesis assumes that everyone paying attention to the same information, weighting it the same, and inviting in the same way.
This obviously isn’t true.
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One problem with testing the Efficient Market Hypothesis is that we don’t have a perfect market or model to compare the actual market to.
We don’t know what prices should be.
But, sometimes it’s pretty easy to spot what prices shouldn’t be.
SpaceX
SpaceX will IPO on Friday.
Apparently, the folks bringing this company public are very strong believers in the Efficient Market Hypothesis.
In a typical IPO, the price is set as a range - say $100 to $120 per share.
But SpaceX knows exactly what it’s worth, and has set the price at $135 per share.
That’s about $1.7 trillion for the whole company.
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What do you get for that price?
A company that had $18.7 billion in revenue in 2025, and lost $4.9 billion.
That puts the IPO price at about 94x sales.
For perspective, here’s the Price/Sales of the Mag 7:
Nvidia: 21.3
Tesla: 15.1
Alphabet: 10.7
Apple: 10.3
Microsoft: 10.0
Meta: 7.5
Amazon: 3.7
Some Quick AI Math
Let’s also quickly take the exampl