Dot Com Boom

The dot-com bubble (also known as the dot-com boom, the tech bubble, the Internet bubble, the dot-com collapse, and the information technology bubble) was a historic economic bubble and period of excessive speculation that occurred roughly from 1997 to 2001, a period of extreme growth in the usage and adaptation of the Internet by businesses and consumers. During this period, many Internet-based companies, commonly referred to as dot-coms, were founded, many of which failed.

During 2000–2002, the bubble collapsed. Some companies, such as Pets.com and Webvan, failed completely and shut down. Others, such as Cisco, whose stock declined by 86%, and Qualcomm, lost a large portion of their market capitalization but survived, and some companies, such as eBay and Amazon.com, later recovered and surpassed their dot-com-bubble stock price peaks.

The commercial growth of the internet was sparked by the advent of the World Wide Web and then the release of the Mosaic web browser in 1993. In the late 1990s, the reduction of the "digital divide", advances in internet connectivity, increases in uses for the internet, and greater education on the use of the internet led to further increases in internet usage. Between 1990 and 1997, the percentage of households in the United States owning computers increased from 15% to 35%.Information and communications technology progressed from a luxury to a necessity. The shift to an economy based on computerization is known as the Information Age.

As a result of the rapidly-increasing usage of the Internet, many investors were eager to invest, at any valuation, in any company that had one of the Internet-related prefixes or a ".com" suffix in its name, leading to a . During the bubble, the valuations of companies in the quaternary sector of the economy increased extremely rapidly. Venture capitalists, eager to profit on this investment demand, moved to raise and invest capital faster and with less caution than usual. A combination of rapidly increasing stock prices, market confidence that the companies would turn future profits, speculation in stocks by individuals, and widely available venture capital created an environment in which many investors were willing to overlook traditional metrics, such as the price–earnings ratio, in favor of basing confidence on technological advancements. The low interest rates of 1998–99 helped increase the availability of funding. The Taxpayer Relief Act of 1997, which lowered the top marginal capital gains tax in the United States, is also cited as a reason that people were willing to make more speculative investments.

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