Business
The Dot-com Bubble Explained
Explore the Dot-com Bubble, the historic stock market boom and bust of the late 1990s fueled by speculation in internet-based companies.
What is it?
The Dot-com Bubble was a historic stock market bubble in the late 1990s, defined by extreme speculation in internet-related companies. From 1995 to its peak in March 2000, the Nasdaq Composite index soared as investors poured money into "dot-coms," many of which had no clear path to profitability. The frenzy was driven by excitement over the new internet economy, leading to sky-high valuations for companies with minimal revenue. The bubble burst spectacularly between 2000 and 2002, causing the market to crash and numerous companies to fail.
Why is it trending?
The Dot-com Bubble serves as a timeless cautionary tale in finance. It re-enters public discussion whenever a new technology, such as AI or cryptocurrency, experiences a rapid surge in investment and valuation. Commentators draw parallels between the dot-com era's speculative mania and today's market trends, questioning whether current booms are sustainable. Its lessons on market psychology, speculative risk, and the importance of solid business fundamentals remain highly relevant for investors trying to navigate volatile market cycles.
How does it affect people?
The collapse of the bubble had severe consequences. Investors lost trillions of dollars as tech stocks plummeted, wiping out retirement funds and personal savings for many. The crash triggered widespread layoffs across the technology sector and contributed to a mild recession in the early 2000s. Its lasting impact was a fundamental shift in investor behavior, creating a more cautious approach that emphasizes profitability and sustainable growth over the "growth at all costs" mentality that characterized the dot-com era. This event reshaped venture capital and tech development for years to come.