Despite an ongoing pandemic and the U.S. economy barely limping along, the Nasdaq is still trading more than 50% above its March lows. The surge in tech stocks in 2020 has understandably led investors to draw comparisons to the dot-com bubble in 2000.
The Nasdaq ultimately peaked at 5,048.62 on March 10, 2000. Of course, some dot-com bubble stocks have performed much better than others in the 20 years since the bubble burst.
IBM’s Past 20 Years: Without a doubt, enterprise hardware and software stock IBM IBM had major difficulty returning to its dot-com bubble levels.
IBM was founded back in 1911, nearly 90 years before the dot-com bubble. The company was a PC powerhouse in the 1980s, but early IBM investors likely never could have foreseen the rise of the internet, smartphones, cloud computing and many of the other dynamics that have propelled a major shift in IBM’s business over the past 20 years.
IBM has been slowly transitioning its business from PCs to cloud computing and artificial intelligence. IBM reached a peak dot-com era market cap of $215 billion during the peak of the dot-com bubble.
Dot-Com Bubble Fallout: IBM’s high watermark of the dot-com bubble was $246 back in 1999 prior to a two-to-one stock split in May of that year. When the bubble burst, IBM held up relatively well at first, dropping 5% in the year following the Nasdaq top compared to a 59.3% overall decline for the index. Unfortunately, when the Nasdaq stabilized, IBM shares continued to struggle.
IBM’s share price hit $54.01 in late 2002 before rebounding to its split-adjusted dot-com bubble high of $123 in mid-2008. IBM hit its pre-financial crisis high of $130.93 in late 2008. During the sell-off in 2009, IBM shares dropped as low as $69.50. IBM was back making new highs above $140 by late 2010. The stock ultimately made it as high as $213.90 in early 2013 before the company’s legacy PC business really started to weigh down the stock.
IBM drifted steadily lower in the past seven years, dropping as low as $105.94 in 2018 as the company reported consistently negative revenue growth. IBM fell as low as $90.56 in March 2020 during the COVID-19 sell-off before rebounding to around $123 today.
IBM will forever be known as one of the quintessential dot-com bubble stocks given its market cap peaked at more than $20 billion. The good news for IBM investors who bought at the height of the bubble is that the stock’s dividends alone have helped investors turn a profit in the past two decades.
In fact, $1,000 invested in IBM stock at the dot-com bubble peak would be worth about $1,804 today, assuming reinvested dividends.
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