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Definition: Internet Bubble
It is also called as dot-com boom, the Internet bubble or the information technology bubble. It is a speculative bubble during which stock market in the developed nations witnessed their equity value rise quickly from the growth in the Internet.
In the late 1990’s during the dotcom bubble, the equity market value grew rapidly with the Nasdaq index (technology dominated) rose from 1000 to 5000.
The latter half of the 1990’s was a boom and bust cycle. The internet bubble is generally referred to as the growth of the Internet which started with the advent of the World Wide Web.
Investors put a lot of money into internet startups of the 1990’s.They invested the money in the hope that they will become profitable in the long run. But soon they withdraw the money because of the fear of not being able to cash in the growth of the internet.
A combination of quickly rising stock prices, the confidence of the market that the companies will be profitable in the future, individual speculations, and widely available venture capital created an atmosphere in which investors overlooked the traditional parameters, such as P/E ratio.
Finally the bubble collapsed in 1991-2001.There were companies that failed completely