The dot-com bubble bursts
The Nasdaq falls 75 percent as internet-stock valuations collide with actual revenue
Quick facts
- Nasdaq peak
- 5,048 points, 10 March 2000
- Decline
- More than 75%, March 2000 to October 2002
- Value lost
- More than $5 trillion
- Notable failure
- Pets.com
What happened
Through the late 1990s, investors poured venture capital into internet startups on the promise of future growth rather than current profit, driving the Nasdaq Composite index up 86 percent in 1999 alone and to a peak of 5,048 points on 10 March 2000. Cheap credit after the Federal Reserve lowered interest rates following the 1998 collapse of hedge fund Long-Term Capital Management helped fuel the run-up; by December 1999, Nasdaq-listed stocks were worth 80 percent as much as the entire New York Stock Exchange, up from just 11 percent in 1990. The bubble then imploded. The Nasdaq fell more than 75 percent between March 2000 and October 2002, erasing more than five trillion dollars in market value, and companies with no sustainable revenue, including the online pet-supply retailer Pets.com, went out of business within months.
Why it matters
The crash wiped out a generation of internet startups and preceded the US recession of 2001, but the infrastructure built during the boom, fiber optic networks, data centers, and a large pool of engineers who had learned to build for the web, remained in place and underpinned the next decade's real growth once profitable companies like Google and Amazon proved the underlying business model could work.
How we know
Goldman Sachs's own institutional history and the Federal Reserve's essay on the Great Moderation both document the Nasdaq's rise and 75 percent fall, the Federal Reserve's rate policy, and the bubble's connection to the subsequent 2001 recession.
Sources
- Goldman Sachs. The Late 1990s Dot-Com Bubble Implodes in 2000 · General sourcegoldmansachs.com · Cited as a "reference" source (no stronger domain match).
- Federal Reserve History. The Great Moderation · Reputable sourcefederalreservehistory.org · The domain "federalreservehistory.org" is on our Reputable source registry. · Link is live and its text matches the event's key terms (Jul 2026)
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