Dot-Com Bubble Overview (Late 1990s - Early 2000s)
- Technological Spark: The launch of Amazon.com/s?k=Mosaic&tag=dtdgstoreid-20">Mosaic, the first graphical web browser created by Marc Andreessen, which brought the internet to life by displaying images alongside text, leading to the creation of Netscape.
- Netscape IPO: In 1995, Netscape’s IPO shocked Wall Street with shares soaring from $28 to $75 on the first day, despite the company not making profits, igniting a frenzy around internet companies.
- Market Mania: Investors began valuing companies based on growth potential rather than profits, leading to a gold rush of internet startups with ".com" suffixes, many without viable business models.
- Examples of Dot-Com Companies: Pets.com, Bu.com, Webvan, and others that raised huge capital but spent extravagantly on marketing and parties rather than sustainable business operations.
- Investor Behavior: Driven by FOMO (fear of missing out), inexperienced investors poured life savings into dot-com stocks, inflating valuations irrationally.
- Warnings Ignored: Alan Greenspan, then Chairman of the Federal Reserve, warned of "irrational exuberance" but was largely ignored.
- Bubble Burst Triggers:
- Y2K bug fears caused early selling.
- Rising interest rates in 1999 made bank deposits more attractive than stocks.
- Japan’s economic recession in 2000 triggered global risk aversion.
- Collapse Impact: The NASDAQ index fell 80% in two years, wiping out $1.75 trillion in market value. Thousands of companies folded, millions lost jobs, and many investors faced ruin.
- Survivors: Amazon, Google, eBay, and Apple survived due to solid business models.
Lessons from the Dot-Com Bubble
- The bubble highlighted that despite revolutionary technology, traditional business fundamentals like profitability and sustainable models remain crucial.
- Venture capitalists, investment banks, and capital markets played a significant role in inflating the bubble through greed and speculation.
Parallels to 2025 Technology Trends
- Current Technologies: Crypto, AI, and blockchain are generating hype reminiscent of the dot-com era.
- Misuse of Buzzwords: Many companies falsely brand themselves as AI or blockchain firms to attract investments without genuine technological backing.
- Case Study - Builder (2023):
- Promoted as an AI-powered no-code app development platform.
- Received massive funding from major investors like Microsoft and SoftBank.
- Investigation revealed apps were actually developed by human engineers, not AI.
- Accused of fraudulent practices like round-trip billing to inflate revenues.
- This situation raises concerns about a potential new tech bubble forming, possibly bigger than the dot-com crash.
