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Dotcom bubble


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 speculative bubble covering roughly 1995–2001 during which in industrialized nations saw their equity value rise rapidly from growth in the Internet sector and related fields. While the latter part was a boom and bust cycle, the Internet boom is sometimes meant to refer to the steady commercial growth of the Internet with the advent of the World Wide Web, as exemplified by the first release of the Mosaic web browser in 1993, and continuing through the 1990s.

The period was marked by the founding (and, in many cases, spectacular failure) of several new Internet-based companies commonly referred to as dot-coms. Companies could cause their stock prices to increase by simply adding an "e-" prefix to their name or a ".com" suffix, which one author called "prefix investing." A combination of rapidly increasing stock prices, market confidence that the companies would turn future profits, individual speculation in stocks, and widely available venture capital created an environment in which many investors were willing to overlook traditional metrics, such as P/E ratio, in favor of basing confidence on technological advancements. By the end of the 1990s, the NASDAQ hit a price-to-earnings (P/E) ratio of 200, a truly astonishing plateau that dwarfed Japan's peak P/E ratio of 80 a decade earlier.

The collapse of the bubble took place during 1999–2001. Some companies, such as pets.com and Webvan, failed completely. Others – such as Cisco, whose stock declined by 86% – lost a large portion of their market capitalization but remained stable and profitable. Some, such as eBay.com, later recovered and even surpassed their dot-com-bubble peaks. The stock of Amazon.com came to exceed $700 per share, for example, after having gone from $107 to $7 in the crash.


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