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Dot-com boom and bust
1995–2002; Nasdaq peak March 10, 2000· Event· Companies & fortunes
Well documentedSolid records, texts or physical evidence.
Investors poured money into internet start-ups in the late 1990s; the Nasdaq peaked in March 2000, then lost about 78% by October 2002.
See it on the Innovation & Wealth map →What happened
Netscape's August 1995 stock debut, which more than doubled on day one, started the rush. Firms with little revenue, like Pets.com and Webvan, raised hundreds of millions on growth stories; venture funding and IPOs hit records in 1999. The Nasdaq closed at 5,048.62 on March 10, 2000. As interest rates rose and losses mounted, hundreds of firms failed and about $5 trillion in stock-market value vanished. Survivors like Amazon and eBay emerged stronger.
Impact on society and the economy
It wasted vast sums but also paid for fiber-optic networks and trained talent that later firms used cheaply, and it led to stricter rules on stock analysts.
Think of it like
Like a speculative condo boom: presales on hype, then a glut and failed developers, but the buildings eventually fill with tenants.
How we know
Nasdaq index data, IPO records such as economist Jay Ritter's, SEC cases, and the 2003 $1.4 billion settlement with Wall Street banks over hyped research.
Still debated
Whether bubbles like this are a needed way to fund new infrastructure or mostly waste is still argued, and is now asked about AI.
Connections (5)
▸Railway Mania was a forerunner of Dot-com boom and bustMostly agreed
The connection
In both, a new network technology drew investment far beyond what could pay off. British railway investors in the 1840s and internet investors in the late 1990s bid up shares on growth stories; both crashed, ruining many, yet left useful infrastructure behind: track then, fiber-optic cable later.
When and how
Britain, 1844–1847, when Parliament authorized about 9,500 miles of new line in 1846 alone; US and world markets, 1995–2002.
How sure are we?
Share-price records and historians' studies, notably economist Andrew Odlyzko's papers, show similar patterns; the link is a parallel, not a direct cause.
Debates
Whether investors ever learn from past manias, and whether today's AI spending fits the same pattern, are open questions.
▸Venture capital and Silicon Valley poured money into Dot-com boom and bustWell documented
The connection
Silicon Valley venture firms had learned that a few huge wins, like Apple or Cisco, pay for many failures. After Netscape's 1995 IPO they raced to fund internet start-ups and take them public fast. US venture investment jumped from under $10 billion in 1995 to about $100 billion in 2000, then crashed.
When and how
Sand Hill Road, Menlo Park, 1995–2000, with firms like Kleiner Perkins (Netscape, Amazon) and Sequoia (Yahoo!, Google).
How we know
PwC and National Venture Capital Association MoneyTree data and IPO records track the boom and bust in venture funding.
Debates
Whether venture capital inflated the bubble or merely followed public investors' appetite for internet stocks is debated.
▸Tim Berners-Lee's World Wide Web set off Dot-com boom and bustMostly agreed
The connection
The web turned the internet into something consumers could use, and investors rushed to own the companies that might profit. Netscape's 1995 IPO showed the web's mass appeal, and hundreds of web start-ups followed, many with no profits, inflating the bubble.
When and how
US, 1993–2000; Mosaic (1993), Netscape and Yahoo! (both 1994) were early milestones.
How sure are we?
Websites grew from about 130 in mid-1993 to over 200,000 by mid-1996, and IPO records show the investor rush followed closely.
Debates
Whether the bubble came mainly from the web's real promise or from cheap money, day trading and Wall Street hype is debated.
▸Jeff Bezos and Amazon survived Dot-com boom and bustWell documented
The connection
Amazon raised heavily during the boom, including a $672 million bond sale in February 2000, just before the crash. Its stock fell over 90%, from about $107 in late 1999 to about $6 in 2001, but that cash let it cut costs, survive and post its first profitable quarter at the end of 2001.
When and how
Seattle, 1999–2002; Amazon cut about 1,300 jobs in January 2001.
How we know
Amazon's SEC filings and stock-price records document the bond, the crash, the layoffs and the 2001 profit.
Debates
How close Amazon came to failing is disputed; Lehman Brothers analyst Ravi Suria warned in 2000 that it could run out of cash within a year.
▸Enron collapse came in the aftermath of Dot-com boom and bustWell documented
The connection
Enron rode the boom's enthusiasm, selling itself as a 'new economy' company with a bandwidth-trading unit and the EnronOnline trading website (1999). As the bubble burst and its stock fell, partnerships backed by Enron shares could no longer hide its losses. Its collapse, followed by WorldCom's in 2002, exposed how boom-era accounting had misled investors.
When and how
Houston, 1999–2001; Enron's January 2000 broadband pitch to analysts lifted its stock about 26% in a day; bankruptcy came December 2, 2001.
How we know
Bankruptcy examiner reports and trial testimony link Enron's falling share price to the unraveling of partnerships that depended on Enron stock.
Debates
Whether Enron would have lasted longer without the market crash, or its fraud was bound to surface soon anyway, is unknowable.