The DotCom Bubble in California
The document discusses the DotCom bubble which occurred from 1995-2000 when stock markets saw rapid growth in technology companies and internet startups. Venture capitalists heavily funded many dotcom startups, causing stock prices to soar. However, the bubble eventually burst in 2001 when it became clear many of these companies were overvalued and unprofitable. The bubble bursting triggered an economic recession as many investors lost money and dotcom companies failed. While the crash devastated the stock market, over half of dotcom companies still survived in the following years.
2. Contents
Dot-com bubble
Bubble growth
Soaring stocks
What was the Dot-com bubble
Free spending
The bubble bursts
Aftermath
Reference
3. What was the Dot-com bubble
The dot-com bubble was a stock market bubble
which popped to near-devastating effect in 2001. It
was powered by the rise of Internet sites and the
tech industry in general, and many of these
companies went under or learned some valuable
lessons when the bubble finally burst. Many
investors lost substantial sums of money on the dot-
com bubble, helping to trigger a mild economic
recession in the early 2000s.
4. Dot-com bubble
The "dot-com bubble" was a speculative bubble
covering roughly 1995–2000 (with a climax on March
10, 2000 with the NASDAQ peaking at 5132.52 in
intraday trading before closing at 5048.62) during
which stock markets in industrialized nations saw
their equity value rise rapidly from growth in the
more recent Internet sector and related fields.
5. Bubble growth
Venture capitalists saw record-setting growth as dot-
com companies experienced meteoric rises in their
stock prices and therefore moved faster and with
less caution than usual, choosing to mitigate the risk
by starting many contenders and letting the market
decide which would succeed.This combined with a
period of relative wealth, with many 'ordinary' people
with spare cash investing and day-trading, which
caused a lot of money to chase the available
investment opportunities.
6. Soaring stocks
The term may be used with certainty only in
retrospect when share prices have since crashed. A
bubble occurs when speculators note the fast
increase in value and decide to buy in anticipation
of further rises, rather than because the shares are
undervalued. Typically many companies thus
become grossly overvalued. When the bubble
"bursts," the share prices fall dramatically, and many
companies go out of business.
7. Free spending
According to dot-com theory, an Internet company's
survival depended on expanding its customer base
as rapidly as possible, even if it produced large
annual losses. For instance, Google and Amazon did
not see any profit in their first years. Amazon was
spending on expanding customer base and alerting
people to its existence and Google was busy
spending on creating more powerful machine
capacity to serve its expanding search engine.
8. The bubble bursts
The bursting of the bubble may also have been
related to the poor results of Internet retailers
following the 1999 Christmas season.This was the
first unequivocal and public evidence that the "get-
rich-quick" Internet strategy was flawed for most
companies. These retailers' results were made
public in March when annual and quarterly reports of
public firms were released.
9. Aftermath
More in-depth analysis shows that 50% of the dot-
coms companies survived through 2004. With this, it
is safe to assume that the assets lost from the Stock
Market do not directly link to the closing of firms.
More importantly, however, it can be concluded that
even companies who were categorized as the "small
players" were adequate enough to endure the
destruction of the financial market during 2000-2002.
