Internet Bubble

DEFINITION of 'Internet Bubble'

A rapid rise in equity markets caused by speculation into online-based companies (referred to as dotcoms).


The internet bubble of the late-1990s is often considered a benchmark case of investors abandoning fundamentals in their search for the next big thing. As consumers flocked to the internet, investors were afraid that not becoming involved would be a huge missed opportunity. Venture capital companies and speculators poured money into internet startups during the 1990s in the hope that those companies would one day become profitable.

BREAKING DOWN 'Internet Bubble'

The internet bubble of the 1990s burst after more than five years of steady market growth, peaking on March 10, 2000. The collapse of many startup internet companies, along with several interest rate increases by the Federal Reserve, led to an economic recession precipitated by a rapid decline in the Nasdaq.

RELATED TERMS
  1. Dotcom Bubble

    A rapid rise in equity markets fueled by investments in internet-based ...
  2. Bubble Company

    A company whose valuation greatly exceeds that suggested by its ...
  3. Startup

    A company that is in the first stage of its operations. These ...
  4. Tech Bubble

    A pronounced and unsustainable market rise attributed to increased ...
  5. Speculative Bubble

    A spike in asset values within a particular industry, commodity, ...
  6. Bubble

    1. An economic cycle characterized by rapid expansion followed ...
Related Articles
  1. Economics

    How Does a Bubble Form and Burst?

    A bubble forms when prices grow beyond their true value.
  2. Personal Finance

    Economic Bubble: Toil And Trouble!

    You might like the idea of profiting from a bubble, but you’d probably like to avoid suffering from its aftermath. Here is how an economic bubble works.
  3. Economics

    Should the Fed Be More Worried About Asset Bubbles?

    While the Fed should be concerned that assets bubbles might impact economic stability, monetary policy is not the best tool to mitigate this threat.
  4. Economics

    How Do Asset Bubbles Cause Recessions?

    Understand how asset bubbles often lead to deep, protracted recessions. Read about historical examples of recessions preceded by asset bubbles.
  5. Personal Finance

    Five Of The Largest Asset Bubbles In History

    The five bubbles discussed here were among the biggest in history; their lessons should be heeded.
  6. Fundamental Analysis

    Investing in the Inner Workings of the Internet (CSCO, HPQ)

    A guide for investors looking to bet on the companies that enable the Internet's inner workings
  7. Economics

    5 Steps of a Bubble

    In the financial sense, a bubble refers to a situation where the price of an asset far exceeds its fundamental value.
  8. Economics

    The Myth About Market Bubbles

    Bubbles have made and ruined fortunes. Though they can be difficult to predict, understanding how they work gives you a visible advantage.
  9. Fundamental Analysis

    What A Tech Bubble Could Mean For The Economy

    Are technology stocks in a bubble? And if so, what might the consequences be?
  10. Investing

    Are We Heading for a Real Estate Bubble?

    Housing prices across the United States have been on a steady rise over the past few years. Does this mean we are seeing another bubble?
RELATED FAQS
  1. What average annual return has the internet sector historically generated?

    Learn about the performance of Internet stocks, one of the newest types of investment sectors, and discover how stock bubbles ... Read Answer >>
  2. What lessons did the tech bubble crash give to investors in the Internet sector?

    Learn how investors contributed to the dot-com bust and how Internet services and investing has changed since the market ... Read Answer >>
  3. How has investing in the Internet sector evolved over time?

    Learn how early investors of the Internet sector received a valuable lesson and influenced modern-day markets after the dot-come ... Read Answer >>
  4. What are the primary risks an investor should consider when investing in the Internet ...

    Learn what risks to look out for when considering investments in the Internet sector in order to maximize potential profits ... Read Answer >>
  5. What developed countries have the greatest exposure to the Internet sector?

    Find out which developed countries have the greatest exposure to the global Internet sector, lead by global Internet companies ... Read Answer >>
  6. What are the main reasons for investing in the internet sector?

    Explore key reasons for investing in companies in the Internet sector. Learn about leading companies delivering products ... Read Answer >>
Hot Definitions
  1. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  2. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  3. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  4. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  5. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  6. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
Trading Center