![]() Billions were spent on marketing in an attempt to grab market share in the new frontier land of the internet, but the underlying business models were flawed. Many smaller companies which had gone to the market in the year or two before the crash collapsed – some had reached market valuations in the billions, despite never having made a profit. Microsoft’s share prices did not reach its pre-bubble highs until 2015, Oracle until 2016 – Amazon managed to do so in 2009. The Nasdaq did not recover its pre-crash highs until 2015. But a lesson from the dot.com era is that share valuations can take years to recover bubble levels again. It is very hard to know how market trends will play out. Meta shares are down 66 per cent this year to date, for example. The valuation of some big players has crashed. But the value put on many firms had started to look very frothy and the Nasdaq is down nearly 30 per cent this year, even after some recovery in recent weeks. The spectacular valuations of IPOs in late 1990s – anything with a name ending in dot.com seemed to attract a stellar number – has not been repeated this time. The scale of investor wealth destruction was extraordinary, and by the late stages many smaller investors were involved. The Nasdaq index rose from roughly 1,000 in 1995 to more than 5,000 at its peak in early 2000, before collapsing to 1,140 in October that year. The dot.com boom was not the first time that rationality took a back seat, but it was one of the most spectacular. Stock market valuations are meant to be based on logic, traditionally to reflect the future earnings of companies. Stock market valuations can rise well beyond justified norms ![]() So, what lessons can we learn from the last time the bubble burst and what does this mean for the tech sector in Ireland? 1. Now the sector has “got ahead of itself” again, with stock market valuations falling from early this year and then the round of big job cuts and industry turmoil. The fallout hit jobs, wealth and economic growth. ![]() Back then, tech company shares were hugely overvalued and there was a rush of IPOs to the market, supported by little more than hope that the companies involved could grab market share in the online “gold rush”. But while the tech sector is now massively more developed than it was 20 years ago, there are clear echoes today of the bursting of the dot.com bubble in March 2000. ![]() History never repeats itself – not exactly anyway. ![]()
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