What caused the dot com bubble in 1998-2000?

On 10 March 2000, the Nasdaq index of Leading technology shares was showing greater spikes, which resulted in bursting of the Dot com bubble.

The Dot com bubble

It was back in the period 1995-2000, a period where most of the today-famous tech companies (the then internet-based start-ups) were born, Amazon, eBay, Apple, Cisco – they weren’t just born, they also survived the dot com bubble. In essence, the dot-com bubble was a sentiment-based market rise where the market went from less than 1000 in 1995 to the highest of 5408.60 in 2000, after which it eventually collapsed.

Deep-dive:

While these new tech companies were coming up with new websites (supposedly, new technology), every investor out there in the market had this drive to invest in these companies, not by conventional company analysis methods like various ratios like P/E ratios or other methods, and instead, they invested in these companies based on the buzz around these companies – where these companies were providing their services cheaper or even free. Furthermore, the dropping of interest rates back in 1998 motivated these investors to invest even more! Owing to these investments, some of the founders of the start-ups made fortunes, these events motivated the investors, even more, to invest – applying their faulty logic that the founders getting rich was directly indicating that the companies were doing well. We all know what happens when things are just going right all the time.

And it happened, in 1999, all the above leaks began doing the damage, a lot of companies started going bankrupt, companies lost trillions of dollars in their valuations and the investments were lost. 52% of the tech companies died back then and only a few of those that survived, exist today. In essence, the companies that did not die during the dot-com bubble eventually did due to the effect of the dot-com bubble or other competitive forces out there.

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