The collapse of technology-share valuations after the Nasdaq peaked in March 2000 is known as the dot-com crash. The Nasdaq Composite reached 5,048.62 on March 10, 2000, after years of enthusiasm for internet companies and rapid technological change.
Many start-ups attracted enormous investment despite having little revenue, no profits, or untested business models. Investors often valued companies using website traffic, projected growth, or other measures instead of established earnings. Venture capital funded thousands of firms, while public offerings created spectacular first-day price increases.
The Federal Reserve had raised interest rates, and investors gradually became less willing to pay extreme prices for speculative growth. When confidence reversed, technology shares fell sharply and many internet companies failed. The crash was not caused by the internet itself: the underlying technology continued expanding, while unrealistic valuations and weak business models were exposed. The Nasdaq did not regain its 2000 closing high until 2015.