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.

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RELATED FAQS
  1. What average annual return has the internet sector historically generated?

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  2. What lessons did the tech bubble crash give to investors in the Internet sector?

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  3. How has investing in the Internet sector evolved over time?

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  4. What are the primary risks an investor should consider when investing in the Internet ...

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