Timeline of the dotcom bubble: from euphoria to collapse
The internet bubble, or dotcom bubble, spanned a key period from the first major stock market introduction of an internet company, Netscape, in August 1995, to the Nasdaq low in October 2002. The Nasdaq Composite, the flagship index of technology stocks, rose from 751 points in August 1995 to a historic peak of 5,132 points in March 2000, an increase of more than 580% in less than 5 years.
This spectacular rise was followed by a brutal collapse: in October 2002, the Nasdaq fell to 1,114 points, losing 78% of its value from the peak. The market took nearly 15 years to regain the levels of 2000. This period marked the massive disappearance of internet companies and a radical correction of valuations.
| Date | Event | Nasdaq Index |
|---|---|---|
| August 1995 | Netscape IPO | 751 |
| March 2000 | Nasdaq Peak | 5,132 |
| October 2002 | Nasdaq Low | 1,114 |
The mechanisms of a financial bubble: delirious P/E ratios and hollow metrics
The main driver of the dotcom bubble was the explosion of valuations based on staggering growth assumptions, often disconnected from economic fundamentals. The price/earnings (P/E) ratios of many internet companies reached astronomical levels. Amazon, for example, displayed a P/E above 900x at the end of the 1990s.
This extravagant valuation was partly explained by the absence of real profits and a focus on revenue growth and user numbers. The "eyeballs" criterion — the measurement of internet traffic and unique visitors — had become a substitute for profitability. Investors were betting on the rapid conquest of market shares e