The Dot-Com Crash (2000-2002): When the Internet Bubble Burst

The dot-com crash (also called the dot-com bubble burst) was a stock market collapse from March 2000 to October 2002, centered on internet and technology companies. The NASDAQ Composite index fell 78% from its peak of 5,048 (March 10, 2000) to a trough of 1,114 (October 9, 2002), wiping out approximately $5 trillion in market value. ## The Bubble (1995-2000) The commercialization of the internet in the mid-1990s generated enormous speculative enthusiasm. Companies with no revenue, no profits, and sometimes no viable business model attracted massive investment based on "eyeballs" (website visitors) and projected future growth. Adding ".com" to a company name could boost its stock price overnight. The prevailing thesis: the internet would change everything, so traditional valuation metrics didn't apply. Venture capital flooded into startups. Companies like Pets.com, Webvan (online grocery delivery), and Kozmo.com (one-hour delivery) raised hundreds of millions while burning cash at unsustainable rates. The IPO market was feverish — companies with no earnings could go public and see their stock double on the first trading day. ## The Crash The bubble began deflating in March 2000. Triggers included rising Federal Reserve interest rates (which made speculative capital more expensive), a wave of disappointing earnings reports, and the realization that many internet business models were fundamentally unviable. The sell-off cascaded through 2001 and accelerated after the September 11, 2001, attacks. By the time the market bottomed in October 2002, the NASDAQ had lost 78% of its value. Companies like Pets.com (which spent $11.8 million on a Super Bowl ad before going bankrupt), Webvan ($830 million raised, shut down in 2001), and WorldCom (accounting fraud revealed during the crash) became symbols of the excess. ## Survivors The companies that survived the crash — Amazon (which dropped 93% from peak but had a viable logistics business underneath), eBay, Google (founded 1998, IPO in 2004), PayPal — went on to define the modern internet. The crash didn't prove that the internet was overhyped; it proved that most *specific implementations* were overhyped while the underlying technology was transformative. ## Legacy The dot-com crash is the standard reference point for speculative technology bubbles. It informs analysis of subsequent cycles: the 2017-2018 cryptocurrency bubble, the 2020-2021 SPAC/meme stock frenzy, and ongoing debates about AI company valuations. Even the worst-case 25-year dollar cost averaging scenario — beginning investment on the exact peak of the dot-com bubble — would have produced roughly 400% total returns by 2025 through disciplined continued investment. Dollar Cost Averaging and Drawdowns: Why Market Drops Build Long-Term Wealth How the Bond Market Controls Mortgages, Stocks, and Jobs