Why did many technology companies have a surge in their stock prices right around Y2K?

by Joost J. Bakker IJmuiden

I’m looking at the stock histories of various tech companies, including Qualcomm, Cisco, Apple, Sony, Yahoo, and Dell, all of whom seemed to have their stock prices surge right around New Year 2000, only to have them sharply drop by the end of the year. What happened in the tech sector then? I thought people were fearful of investing in technology due to the Y2K bug, but the stocks don’t seem to have reflected that at all.

Answer by Petr
Many people believed in the late 90′s that the internet and IT would really change the economy, something like what the industrial revolution did in the past – they called it “new economy”. So they bought all technology stocks at ridiculous prices (like 500x annual profit). It was crowd psychology. People liked technology stocks, there was demand, so the financial analysts and companies recommended tech stocks, because that was everywhere the money (and potential client commissions) was. The media covered it, people talked about it, it was like a spiral. There was a guy somewhere in a garage programming something on his computer and the investors were already throwing millions at him before he even showed any viable product or business plot. Technology was “in”. You looked like a fool if you didn’t own tech stocks and your get-rich-quick friends were laughing at you.

Year 2K (the change 1999-2000) was not a huge issue.

But the Fed raised interest rates in 1999-2000 and then there was economic slowdown and Bush came and Sept 11 and people saw the tech companies were no better at withstanding the economic slowdown than the “traditional” companies – except that they were priced 10x or 20x higher, so they fell sharply. Of course some companies survived and altered our lives (MSFT, DELL, AAPL, YHOO), but most just crashed and burned.

You see analogy of this from time to time, but people never learn – and another thing is that you never know if it’s a “bubble” or if it’s solid, in anticipation of it happens. For example crude oil went to 150 in 2008. There were some solid essential reasons for the rise (oil gets scarce, no doubt about that). But there was also a huge part of psychology involved – people bought oil stocks and oil ETFs and oil everything. And then it went to 35. Same for other commodities in 2007-2008.

You see it with gold now. Everyone is talking about how gold will go to 1,500 or 2,000 dollars. It’s the standard thing now. But is it for real or will it drop again? No one knows, in anticipation of it happens.

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I’ve been playing with my new LightScribe drive. It’s not the LaCie that I wanted (they are out of stock as usual) but it was less than half the price and hideous as it is I like the results.

Take the Apple thing right now. There is talk of Job stepping down and some are worried about stock prices falling too. How does this work. I know a small about accounting, I’m just curious how you use someone’s position as equity?

Answer by Joseph T
Steve Jobs is one of the original founders of Apple. The key is that Steve Jobs is the visionary, the thought man of the company. The last time he left the company tanked do to terrible management. He came back and it took right off again. If he leaves again expect the stock to take a nose dive. Apple really is Steve Jobs, without him the company is nothing.

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