Bulletins

The 'next' dot-com crash already happened — that doesn’t mean it’s over

Nearly 40% of companies trading on the Nasdaq have seen their valuations slashed by more than 50% from 52-week highs. Big Tech’s dominance makes this easy to overlook.

Nasdaq IPO

Dozens of companies on Nasdaq have seen their stock value slashed in half from 52-week highs.

Photographer: Michael Nagle/Bloomberg via Getty Images

Nearly four in 10 companies listed on the Nasdaq exchange, or 38%, are trading 50% below 52-week highs, according to research compiled by Sundial Capital Research. At no point in the previous two decades have so many Nasdaq stocks been cut in half while the overall index remains near a peak.


The data from Sundial Capital suggests the quiet bursting of some bubble. The question for investors is whether the damage has been contained or if it serves as a leading indicator of more trouble ahead, as happened during the early 2000s dot-com bust.

The Nasdaq composite index has fallen nearly 5% in the first week of 2022. On Wednesday, investors reacted to the Federal Reserve signaling that it could raise interest rates in March — sooner than anticipated — to prevent the economy from overheating.

Those looking to draw parallels to the early 2000s dot-com crash will point to a similar maneuver performed by former Fed Chair Alan Greenspan in the spring of 2000. Leading up to that short-term interest rate hike, the Fed had increased the money supply at an annualized rate of 22%. We’ve since eclipsed that mark: Between February 2020 and February 2021, the Fed increased the money supply by 26%, which was more than any time since 1943. Inflation rates likewise rose to four-decade highs in November 2021.

Still, the overall Nasdaq index is up nearly 19% since March 2021. The index is weighted by market capitalization: Apple, Microsoft, Amazon, Tesla, Alphabet, Meta and Nvidia together comprised nearly 45% the index value as of Dec. 31. The price of the overall index can therefore increase if the tech behemoths perform well, even if the majority of companies perform poorly. With the exception of Amazon (up only 3%), the tech giants have performed exceptionally well over the last year: Nvidia managed to more than double its market cap in this time frame, while Microsoft swelled nearly 44% and Apple nearly 32%.

A final indicator you might not expect? Super Bowl commercials. The 1999 Super Bowl had two dot-com advertisers. By 2000, however, cash-flush dot-com companies occupied nearly 20% of the total slots. We don’t know the full lineup of advertisers this year, but Crypto.com will notably make an appearance. Ads reportedly cost up to $6.5 million for a 30-second slot.

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Bulletins