Rising venture capitalist spending in the Silicon Valley raises questions about the possibility of a repeat of the dot-com bubble of the end of the 20th century.
And while A&M professors acknowledge another technology bubble could develop, the message remains: 2014 is not 1999.
William Johnson, assistant finance professor, said a tech bubble occurs when prices of an asset are above the range of traditional value methods.
“According to this definition, we are unlikely to be in a tech bubble as prices of the average technology stock are still within range of traditional valuation techniques,” Johnson said. “Technology is increasing at a rapid rate, which may lead to a bubble, an economic situation where everything is rapidly going well. With the increased reliance on apps, new startups surfacing almost every day and the speedy growth of e-commerce, it is safe to say there is a tech age.”
James Cho, telecommunications and media studies graduate student, said he believes a bubble could happen in today’s world because successful startups are proliferating and growing. Investors have a desire to get rich quickly, and people try to get on board with startups before the business actually gets off the ground.
“Mark Zuckerberg has skyrocketed into success with an experiment he created in college,” Cho said. “Today, it is worth tons.”
Cho said companies can quickly get overvalued, thus creating a bubble.
“You always want to be putting your money into the next big thing, and that impulse is understandable,” Cho said.
Randy Kluver, associate communication professor, said the situation in the United States differs from that of the turn of the century.
“One of the things that happened during 2000 that is very different from now is that the tech bubble was not about infrastructure, systems and software,” Kluver said. “It was about Internet companies trying to profit from the emerging Internet. As a result, no one had really figured out successful business models. It was inevitable these efforts would crash.”
Kluver said he believes the tech world has learned from its past mistakes. Today, companies have prioritized their business models and focus on a completely different ideal — emphasis on ideas, instead of competing with other companies.
“Because of this, I don’t believe that technology companies are overvalued at this point,” Kluver said. “Nowadays, companies like Google and Apple make large amounts of money because they’ve figured out how to score from competitive technology.”
Johnson said while it is unlikely a bubble has formed, the nature of the phenomenon is it is hard to identify.
“A bubble in any asset class is nearly impossible to identify until it has clearly popped,” Johnson said.