From Yahoo Finance: 2025-03-28 18:02:00

In the late 1990s, the stock market bubble was fueled by internet business mania. Tech companies saw valuations soar by adding “.com” to their names. The Nasdaq peaked at 5,048 before crashing in 2000, taking 15 years to recover. The S&P 500 also struggled, only sustaining recovery after 2012.

Investors need to heed the lessons from the Dot Com era as AI companies surge today. The excitement around AI is similar to the internet boom, where many companies added AI to attract investors. Investors should focus on fundamentals like cash flow and growth instead of following trends.

During the Dot Com era, companies saw huge valuation spikes only to declare bankruptcy by 2002. Venture capital flowed into unprofitable challengers. Investors should diversify and invest in sectors as a whole with ETFs instead of picking individual winners.

In the late 1990s, companies with outlandish P/E ratios crashed, leading to reality checks. The market saw venture capital flow into untested companies, many of which failed. Investors should look for long-term winners in the tech space after industry hype dies down.

The Federal Reserve raised interest rates in the late 1990s, realizing money was too cheap. Today, rates are rising again, but investors still act as if capital is free. AI companies generate revenue, but valuations are high, echoing the Dot Com bubble. Investors must learn from history to avoid repeating mistakes.



Read more at Yahoo Finance: 6 Stock Market Lessons from the Dot Com Bubble That Apply in 2025