The dot-com crisis took place between 1997 and 2000, due to an overvaluation of Internet-related companies, causing a strong economic bubble that led to the bankruptcy of large companies.
It all started in 1997, when the western stock markets saw a huge growth in the technology sector. In addition, large companies such as Apple, Microsoft and Yahoo! achieved tremendous success, motivated by technological progress and the onset of economic globalization.
The NASDAQ (stock exchange of the 100 largest companies in the technology sector) emerged as a competitor to the traditional Wall Street stock exchange. In an atmosphere of euphoria and optimism, the stock market rose to values above 5,000 points (currently at 11,700).
There were many investors who obtained great returns, even selling shortly before the bubble burst, creating great successes, and making the index even more attractive.
As we have explained, the evolution of the NASDAQ was due to the development of new computer technologies, which led to the globalization of the different markets, thus allowing them to operate in real time.
Everything was going well until March 2000, when the NASDAQ reached its peak and from that moment onwards it fell in great proportions, causing the closure of companies due to bankruptcy and millions of investors were totally ruined.
Why? Well, at the beginning of the year 2000, there was an increase in interest rates, causing a decrease in investments in this type of securities, as financing became more expensive in order to leverage and obtain higher returns.
There was widespread fear (as in all stock market crises), leading to a massive sell-off of shares on March 13, 2000, with the index falling 9% in less than a week.
In 2001, the index deflated at full speed, with a multitude of companies going out of business due to lack of financing (due to investors’ fear of buying shares). The dot-com crash caused 5 trillion in value losses in the technology sector alone.
