Why the rise of dot-com companies in the 1990s outran fundamentals

The dot-com boom was a stock market bubble that developed during the late 1990s and peaked on March 10, 2000, alongside widespread adoption of the Internet and World Wide Web and rapid growth in startup valuations. The lessons answer why optimism about dot-com companies outran their business fundamentals. They build an understanding of how investment, infrastructure, and promotion shaped expectations and business performance.

2 articles, 1 book · about 48 min of reading and viewing

The reading path

1. Read
   

   the rise of dot-com companies in the 1990s · Wikipedia · 23 min read

   Amazon recorded a 900% increase in revenue over the previous year at its IPO in 1997, meaning its initial public offering of shares. By 1998, Amazon had a valuation of over $14 billion but was still not making a profit. Telecommunications equipment companies invested more than $500 billion, mostly financed with debt, in fiber optic cable, switches, and wireless networks in the five years after the American Telecommunications Act of 1996 went into effect. The growth in capacity vastly outstripped the growth in demand, adding infrastructure amid the dot-com boom. During the rise of dot-com companies in the 1990s, Qualcomm shares rose in value by 2,619% in 1999. Between 1995 and 2000, the Nasdaq Composite stock market index rose 400%.

2. Read
   

   Dot-com Bubble Explained | Story of 1995-2000 Stock Market · Finbold · 25 min read

   Venture capitalists and individual investors poured money into Internet-based companies, hoping they would one day become profitable and abandoning all caution to capitalize on the growing dot-com novelty vision. Some companies with no revenue or profits, no proprietary technology, and no finished product went public through IPOs, and their stock prices tripled and quadrupled in a day. Some dot-coms threw as much as 90% of their budget on advertising. Most Internet companies incurred net operating losses as they spent lavishly on advertising and promotions to build market share or mind share, consumer awareness or popularity, as fast as possible.

3. Book
   

   The New New Thing: A Silicon Valley Story · Bookshop.org

   The New New Thing by Michael Lewis focuses on James H. Clark, founder of several Silicon Valley companies, and the entrepreneurial culture that dominated the area during the height of the Internet boom.

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