MICHELE NORRIS, host:

The NASDAQ Composite Index gained 18 points today. It closed at 2,358. That's of interest because it was 10 years ago today that the NASDAQ hit its all-time high, 5,048.

NASDAQ is home to a lot of the Internet and telecom stocks that shot into the stratosphere during the dot-com boom. When the tech bubble burst, it left scars on the economy that we're still feeling.

NPR's Jim Zarroli reports.

JIM ZARROLI: WorldCom, AOL, Yahoo!, there was a time that stocks like these traded at astronomical levels. If you owned them, you just had to sit back and watch them rise in value. And even though a lot of people warned that the tech surge wouldn't last, stocks kept climbing, says Jeremy Siegel of The Wharton School.

Professor JEREMY SIEGEL (Finance, Wharton School, University of Pennsylvania): Bubbles always go further than anyone expects, and this one certainly did.

ZARROLI: This boom in tech stocks really took off in the 1990s, a reaction to the digital revolution, which was already radically changing the way so many industries operated. Companies that hadn't existed a few years before had suddenly become powerful forces in the economy.

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ZARROLI: By the year 2000, any company with dot-com in its name could make investors swoon, even if it had no profits and no real hope of earning any. There was a new paradigm in the economy, or so it seemed. Dave Kirsch teaches at the University of Maryland's Smith School of Business.

Mr. DAVE KIRSCH (Management and Entrepreneurship, Robert H. Smith School of Business, University of Maryland): I had students who were rushing off to start companies, and I thought, gee, well, you know, what am I doing here? I would try and teach strategy in the classroom, and the students would look at me like that was yesterday's news, and I started to believe it.

ZARROLI: But bubbles burst, and this one did too. On March 10th, tech stocks began a fall they've never really recovered from. Why it happened then is something economists are still studying. Kirsch says Internet sales had been disappointing during the holidays.

Mr. KIRSCH: It's as those data start to come out in early 2000 that investors start to realize: Not everyone can be Amazon. Not everyone can succeed and get big fast.

ZARROLI: Then, too, the Y2K scare was over, which meant tech spending by companies was down. Jonathan Coleman of Janus Capital says investors started getting nervous.

Mr. JONATHAN COLEMAN (Co-Chief Investment Officer, Janus Capital): I think the market over long periods of time can vacillate between fear and greed. We were coming off an extended era of greed. Once the market started to crack, I think a lot of investors looked up and fear started to take over.

ZARROLI: In the carnage that followed, a lot of new tech companies went under, but not all of them. David Kirsch has studied about a thousand of the Internet companies born during the late '90s. Nearly half still exist today. Kirsch says many of these are smaller companies that found a retail niche and took advantage of it. Today, he says, these companies make decent profits, but they probably won't ever make a killing in the market.

Mr. KIRSCH: So in some sense, the firms that succeeded were the firms that didn't fall victim to get big fast, that followed basic business practices.

ZARROLI: The technology sector as a whole is now healthy. Companies like Oracle and Cisco are stalwarts of the stock market, but Jeremy Siegel says they're still well short of the heights they hit a decade ago.

Prof. SIEGEL: If you survived the recession of 2002, you're probably going to be around, but you probably will not enjoy the price that you had experienced back then a decade ago, maybe never again.

ZARROLI: Siegel notes that the NASDAQ Composite Index is still 50 percent below where it was a decade ago, but he says it took almost 30 years for the Dow Jones Industrial Average to recover all the ground it lost in the crash of 1929. And it could take just as long for the tech sector to recover this time around.

Jim Zarroli, NPR News.

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