Eli5 the ‘dot com bubble ‘ and why it burst in the early 2000s?

Question

EDIT: thanks for all these brilliant responses. Hits great to get the various perspectives. Upvotes are on me!

In: 13

Answer 1

It was mostly “fad investing”. Computers were the “in thing” and people were investing heavily in companies involved in tech.

Supply and demand tells us that when you have more buyers than sellers prices go up. People seemed to think prices would keep going up, kept investing and the companies became significantly overvalued as a result.

There was always going to be a correction but when the events of 11th September 2001 occurred, markets across the world collapsed and these overpriced shares dropped rapidly; ultimately the companies that survived found themselves with more realistic share prices.