The dot.com bubble peaked on 10 March 2000, as internet companies saw spectacular gains before dramatic falls. Now, 25 years on, there are fears another bubble has emerged amid AI enthusiasm.
The first few months of 2025 have seen tech stocks like Nvidia, Tesla and Palantir hit by investor nervousness.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “In the dot.com universe, hundreds of stars were shining bright, as hyper-enthusiasm for the digital world took hold of market sentiment. Low interest rates and frenzied interest in tech companies taking off in the new online arena meant capital flowed thick and fast to start-ups making big promises.
“When interest rates started to ratchet up and funding dried up, the dot.com party ended in dramatic fashion. The big bust, when it came, shattered confidence and rocked the foundations of [the] online world, as irrational exuberance blew up in investors’ faces. Failures littered the tech landscape, including online shopping companies Webvan.com, Pets.com and Boo.com, communications firm WorldCom and content network Broadland Sports. Survivors saw their share prices battered.”
Other examples of stock that suffered in the dot.com crash include networking equipment IT company Cisco, which had become the most valuable company in the world – it saw its share price fall by 88%, and its stock still has not fully recovered.
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Amazon shares soared in value in 1999, before collapsing in spectacular fashion. Shares fell by 90% as the company – then known as an online bookseller – was hit by a crisis of confidence as the noughties era began.
However, Amazon stock has since risen in spectacular fashion, with the company becoming a giant global technology innovator and enabler. It’s risen 231,411% from its offer price of $18 at its IPO, which would make that initial investment in just one share, if it was still held, worth more than $41,000 today.
At the 25th anniversary of peak dot.com, there are fears the AI bubble could burst, as investors have been caught up in waves of tech speculation. Nervousness about the heady valuations reached have collided with worries about interest rates staying higher for longer, and the global effects of Trump’s trade policy.
Nvidia has seen its shares fall around 15% year to date, while Tesla – which has invested heavily in AI technology including Optimus robots and the dojo supercomputer – has fallen 26%. Palantir, which specialises in software platforms enabling AI-driven decision-making, has dropped by 20% since the start of the year.
Streeter said: “But as the dot.com boom and bust tells us, there will be survivors of any storm on financial markets. Not all tech companies are created equally, and many will not live up to the AI hype.
“Others have opportunity stamped into their DNA and will be fit enough to weather a sudden drop in confidence. Nvidia stock may have soared by 400% over the last two years, but it’s still only trading at a PE ratio of 29 for the next 12 months, well below the level of some of the other stocks infused with AI enthusiasm. That’s not to say it won’t get sideswiped in any further sell-off, but its earnings potential is not going to disappear overnight.”
