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I asked the AI Microsoft’s AI tool Copilot to tell me about the dot.com bust of 25 years ago. If you are old enough to remember, the dot.com bust came right off the heels of the Y2K computer fears, the September 11 terrorist attacks and anthrax in snail-mail envelopes. It was a really tough time for fundraising.
Read this AI summary of the dot.com bust and see if you get as queasy as I do . . .
Thus sayeth Copilot: The dot.com bust refers to the rapid collapse of internet-based companies that occurred between 2000 and 2002. This event had a significant impact on global financial markets, technology companies, and investor behavior. To understand why the dot-com bust happened, it is important to explore the underlying causes that contributed to both the rapid rise and subsequent fall of internet businesses during this period.
Excessive Speculation and Overvaluation
“During the late 1990s, the growth of the internet led to widespread excitement about the potential of online businesses. Investors poured money into dot-com companies, often without regard for their profitability or long-term viability. Many startups went public with little more than a business plan and a website, resulting in excessively high stock valuations. Speculation drove prices even higher, creating an unsustainable bubble.
Lack of Profitable Business Models
Many dot-com companies prioritized rapid growth and market share over developing profitable business models. As a result, these companies spent heavily on marketing and infrastructure without generating sufficient revenue. When investors began to demand evidence of profits and sustainable operati
ons, many companies failed to deliver, leading to a loss of confidence in the sector.
Easy Access to Capital
Venture capitalists and investors were eager to fund internet startups, often overlooking traditional risk assessments. The abundance of available capital allowed many companies to launch and expand quickly, but it also led to inefficient spending and poor management decisions. Once the market began to correct itself, funding dried up and many companies were unable to survive.
Market Correction and Investor Panic
By early 2000, it became clear that many dot-com companies were unlikely to become profitable. As a result, stock prices began to fall, triggering panic among investors. The sell-off accelerated the decline, causing the value of technology stocks to plummet. Established companies were affected as well, resulting in widespread layoffs and bankruptcies.
I don’t know about you, but this sure sounds like what’s happening today with AI speculation. Hold on to your hats friends, it could get bumpy.