The economic bubble that is also referred to as the ‘dot-com boom’ was the result of investors speculatively pouring money into the numerous internet companies that were founded in the mid- to late-1990s. The exponential growth witnessed by the stock market was primarily based on overconfidence in new online businesses, many of which had a ‘.com’ suffix.
A large number of these companies raised enormous funds by selling shares in initial public offerings, despite the fact that some of them had not even begun to generate income, let alone make a profit.
Driven by a mixture of private investors and venture capitalists, both of whom hoped to make massive gains from the rapid growth of the internet, the stock value of many of the new dot-com companies increased exponentially. However the party couldn’t last and the market quickly declined after the NASDAQ Composite index, which includes many technology companies, peaked at 5,132.52 during trading on 10 March 2000.
Around this time some of the companies began to report huge losses. This bad news, combined with large sell orders of stocks by some of the larger tech companies, led to panic selling that made the stock market lose 10% of its value within just a few weeks. Without access to previously abundant capital other companies folded, bursting the dot-com bubble.
The dot-com crisis was exacerbated by a stock market downturn following the September 11 attacks in 2001. Yet, despite the broader collapse in the tech sector, a number of companies including Amazon, eBay, and Google, managed to survive and later flourish.