The Dot-Com Bubble Burst of 2000 also known as the tech bubble was a major crash of internet-related companies in the early 2000s. An economic bubble or a bubble in the stock market is when stock prices appear higher than they are actually worth based on implausible ideas about a companies future. In the late 1990s, a lot of new internet companies were starting to pop up. More than half of the IPO’s of 2000 were internet companies. Venture capitalists were investing lots of money into these companies even though they couldn’t turn a profit. Investors were speculating on these companies and ultimately investing more than they were worth.
When these new companies were appearing many of them took off and saw exponential growth day after day. Investors realized quickly that the internet was going to be the future, so they started investing. The problem was is that they were overvaluing these companies based purely on speculation. Many traditional fundamentals of investing were being overlooked when excessively investing in internet companies. Companied were IPOing when they hadn’t even finished their product or proven that they could turn a profit in the long run. Investors were all anxious to get in on the next big company. Due to the past success of internet companies, these virtually worthless companies were seeing their stock price quadrupling overnight.
When investing today people should be cautious of inflated bubble stocks. In the stock markets, we are seeing more and more speculation on stocks. To avoid another tech bubble in the stock market investors need to stay focused on the fact that a stock’s popularity can not be used as a metric to see how profitable a company is going to be. A good example of a stock that recently experienced a bubble would be Gamestop. Everyone can look at Gamestop and recognize it as a dying company, it would not be smart to invest in this company with hopes of a huge profit. But recently Gamestop became the center of short squeeze by a group call wallstreetbets. Game stop stock shot through the roof reaching heights of over 1500% of its original price. Eventually, this short squeeze stopped and the bubble popped. When not following traditional fundamentals of investing and evaluating a company the stock market can become a very volatile and dangerous place for investors. With the increase and investors who play the stock market like a betting game, we will start to see more bubbles in the stock market. It will be essential that we avoid another bubble burst of the entire stock market.
