The dot-com bubble crash occurred between 2000 and 2002

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The dot-com bubble crash occurred between 2000 and 2002, when the speculative bubble of internet-based companies burst, causing the NASDAQ index to fall by 83%. It was triggered by rising interest rates, the failure of many dot-com companies to achieve profitability, and a loss of investor confidence. The crash led to a severe market correction, bankruptcies for many companies, and a recession, though some companies like Amazon eventually survived and thrived.

Causes and triggers

• Speculative valuations: In the late 1990s, excessive optimism about the internet led to massive valuations for companies, often regardless of their revenue or profitability.
• Rising interest rates: The U.S. Federal Reserve raised interest rates multiple times in 1999 and 2000, making it more expensive to borrow money and less attractive to invest in speculative stocks compared to safer assets like bonds.
• Flawed business models: Many dot-com companies had unsustainable business models and spent lavishly on marketing and expansion without a clear path to profit.
• Loss of confidence: When companies began reporting disappointing earnings and the first major companies failed, investor confidence evaporated, leading to panic selling.

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Impact and consequences

• Market collapse: The NASDAQ index, which had soared to over 5,000 by March 2000, fell to a low of 1,139 by October 2002.
• Company failures: Most dot-com companies either went bankrupt or were acquired by other firms. Examples include Pets.com and Webvan.
• Economic recession: The crash contributed to a broader economic recession that began in 2001.
• Investor losses: The market downturn erased trillions of dollars in shareholder wealth.
• Survival of some companies: Companies with stronger business models, such as Amazon and eBay, were able to survive and eventually thrive after the crash.

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