The Dot-Com Bubble: when the Internet was worth more than the entire real economy
The irrational rise and devastating crash of the tech market between 1995 and 2002
Between 1995 and 2000, internet company stocks grew 1000% with no profits, no products, sometimes no employees. The NASDAQ then lost 80% of its value in 2 years.
When value = existing on the Internet
In the dot-com era, it was enough to add ".com" to a company's name to see its stock price triple overnight. Pets.com, Webvan, Boo.com — names that make us smile today, but in 1999 raised hundreds of millions from institutional investors.
The numbers of euphoria
The NASDAQ went from 1,000 points in 1995 to over 5,000 in March 2000 — a 400% rise in 5 years. Listed tech companies were valued at revenue multiples unprecedented in market history: 100x, 200x, sometimes infinite (no revenue).
The IPO of theglobe.com in 1998 recorded the largest first-day gain ever: +606%.
The crash
On March 10, 2000, the NASDAQ hit its all-time high of 5,048 points. Then the decline began. It wasn't a sudden crash like Black Monday — it was a slow and inexorable hemorrhage lasting 2 and a half years.
By September 2002, the NASDAQ was at 1,114 points: -78% from highs. Thousands of companies went bankrupt. Millions of retail investors lost their life savings.
The lessons
- Valuations always matter: no innovative business model justifies infinite valuations.
- The market can stay irrational for a long time: but not forever.
- Distinguishing trend from bubble: it's not impossible — the signals were there, but collective euphoria obscured them.