Know about Dotcom Bubble
In the universe of the stock market, there are several terms that are unclear to us. Today we will look at the Dotcom bubble. Firstly let us understand what is the bubble? The bubble is the condition or phase in the stock market when the value of stocks of companies rises above their expectations. To identify the bubble in the stock market, one can observe the graph, and the peak point in the graph is called the bubble. So here, we have come up with one of the examples of the bubble.
What is Dotcom Bubble?
The Dotcom bubble was the bubble or quick rise in the stock equity valuation of U.S. Technology. This bubble occurred due to growth in the investments in Internet-based companies in the late 1990s. It is also popularly known as the Internet Bubble. During this bubble, equity markets have grown exponentially. The NASDAQ index started rising from under one thousand to more than five thousand during the late 90s. The Dotcom was alive from the year 1995-2000. After 2001-2002, the bubble busted and entered a bear market.
The fad-based investing, the excess of venture capital funding for startups, and the failure of dotcoms to turn a profit helped in the existence of the dotcom bubble. The internet came into the world during the early 90s. Many of the investors invested in internet companies with the thinking of them as emerging and profitable companies. Startups raced among each other to be the best. Many startups spend 90% of the budget on advertising. In the year 1999, out of 457 IPOs, 295 were the internet companies. Despite many warnings and cautions, investors saw the burst of the dotcom bubble.
How it burst
With the rapid growth in technology in the 1990s, commercialization helped the internet is growing the capital of the country. The companies that kick-started the dotcom bubble were Intel, Cisco, and Oracle, which flourished in the field of technology in the year 1995.
This bubble was formed due to excess trust in internet startups, secure capital, and cheap money strategies, along with speculation. The stock market valuation is based on profit and earning. On 10th March 2000, the NASDAQ index was around 5048, which was double than the year 1999. The NASDAQ dropped by 77% in the years from 1995 to 2000.In the next few weeks value of the stock market reduced by 10%. All the capitalization of the dotcom companies became worthless in the period.
In late 2001, the dotcom companies folded and investment vanished. The bubble burst into the loss of the investors and led many internet companies to go bust. The companies that survived even after the bubble were Amazon, eBay, and Priceline.
Conclusion
The dotcom bubble was one of the significant events that occurred in the history of the Stock market. We hope this article has given enough information about the Dotcom bubble.
