Dot-com bubble

Definition

The dot-com bubble (or .dom bubble) was a speculative bubble covering roughly 1995–2000 (with a climax on March 10, 2000 with the NASDAQ peaking at 5132.52 in intra-day trading before closing at 5048.62), during which time the stock markets in industrialized nations saw their equity value rise rapidly from growth in the recent Internet sector and related fields.

Overview

While the latter part was a boom and bust cycle, the Internet boom sometimes is 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 a group of new Internet-based companies commonly referred to as dot-coms. Companies were seeing their stock prices shoot up if they simply added an "e-" prefix to their name and/or a ".com" to the end, 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 confidence in technological advancements.

External resources

• Daniel Gross, "In Praise of Bubbles," Wired, issue 14.02 (Feb. 2006) (full-text).
• Mathew Honan & Steven Leckart, "The Dotcom Boom, 10 Years After," Wired (Mar. 2010) (full-text).
• Peter Schwartz & Peter Leyden, "The Long Boom: A History of the Future," Wired, issue 5.07 (July 1997) (full-text).