Definition of tech bubble

The tech bubble was created by investors who believed that anything to do with the the Net would turn to gold. Nearly any dotcom business was able to gain funding and go public. In perhaps the most poignant sign of overreach, internet service provider AOL (America Online) bought Time Warner in 2000, in what is regarded as the worst deal in history. [1]

Long before the housing bubble, sustained low interest rates and global financial imbalances had already created the conditions for excess. The promise of the internet provided the perfect excuse, drawing in tech visionaries and financial opportunists alike. The 1994 launch of the Netscape browser opened the online medium to a mass audience and triggered a gold rush.

Add in the boom in corporate technology spending later in the decade to deal with the Y2K computing problem – also known as the “Millennium bug” – and the full forces of fear and greed were unleashed.

The winners were the internet companies that sold at the peak of the boom or – like AOL – used their inflated currency to buy more enduring assets. [2]

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