The Dot-Com Bubble

The late-1990s Dot-Com Bubble was a time of dizzying tech stock gains followed by a brutal crash. Fast forward to 2025, and tech stocks again dominate headlines – this time fueled by trends like artificial intelligence and cloud computing. Are we reliving the late ’90s mania, or have investors learned some lessons? In this blog-style analysis, we’ll compare then vs. now across valuations, IPO frenzies, investor sentiment, innovation, macroeconomics, and regulation. The goal: to see what the dot-com era can teach today’s tech investors about avoiding mistakes and seizing opportunities.

Dot-Com Bubble Recap: A Cautionary Tale

In the dot-com era (circa 1995–2000), excitement over the Internet’s potential led to explosive market growth. The Nasdaq index quintupled from under 1,000 in 1995 to over 5,000 by March 2000​. Investors were in a frenzy to buy anything with a “.com” in its name.Valuations soared far beyond fundamentals.For example, at the bubble’s peak, Microsoft traded at a price-to-earnings (P/E) ratio of about 73, and Cisco’s P/E exceeded 200. Many lesser-known startups with no profits (and sometimes not even real revenues) saw their stock prices double or triple on IPO day. In 1999 alone, there were457 IPOs, most of them Internet companies​ – and dot-com IPOs often jumped 100%+ on the first day of trading. It was an era ofeuphoriaand “get big fast” mentality, fueled by easy money and fear of missing out.

The party didn’t last. By late 2000, reality set in. As the Federal Reserve raised interest rates to cool the economy (the Fed funds rate climbed back to ~6–7% by 2000)​, capital became more expensive and abundant financing dried up. The Nasdaq crashed nearly 77% from its peak by October 2002​. Hundreds of dot-com companies went bust, and even blue-chip tech firms like Cisco, Intel, and Oracle lost over 80% of their market value​. It took 15 years (until 2015!) for the Nasdaq to regain its March 2000 peak​. The dot-com bust taught a hard lesson: even truly transformative technologies can becomeoverhyped, and when bubbles burst, they destroy a lot of paper wealth.

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