Mark Cuban says investors aren't facing another dot-com crash - and shrugs off Elon Musk's rocky start at Twitter

Mark Cuban. Michael Cohen/Getty Images for The New York Times

• Mark Cuban drew a line between the dot-com bust and the decline in tech stocks this year.
• There were more questionable businesses then, whereas this tech boom was fueled by easy money.
• Cuban also discussed how Elon Musk may be putting Twitter on a better path.

The Internet bubble was much more ludicrous than the run-up in technology stocks during the pandemic, and Elon Musk's rocky start as Twitter's new owner could be a case of teething pains, Mark Cuban has said.

The "Shark Tank" star and Dallas Mavericks owner argued the dot-com bubble was rife with questionable businesses, whereas investors have boosted tech valuations in recent years because of near-zero interest rates, years of outperformance by the Big Tech stocks, and a lack of compelling alternatives.

"The dot-com bust had companies that should not have gone public," Cuban told journalist Eric Newcomer for his "Newcomer" newsletter. "This is a correction because easy money drove up prices and huge market gains increased private investments."

The tech-heavy Nasdaq index has tumbled 28% this year, reflecting heavy stock-price declines this year for the likes of Amazon (-41%), Netflix (-51%), and Facebook-owner Meta Platforms (-67%). Investors have dumped tech stocks because their growth prospects have been hit by inflation and higher interest rates soaking up liquidity.

"When that money fried, valuations dropped like a rock," Cuban said. "But you don't look at these companies and ask why did they ever start."

The billionaire investor raised the prospect of further declines for beaten-down tech stocks.

"It's just a question of where is the bottom," he added. "Which I have no idea."

Cuban also downplayed the chaos at Twitter during Musk's first weeks as CEO. The social-media company has launched then quickly scrapped features, enabled impersonations of official accounts, and already seen layoffs.

"In a year from now, if it finds its footing, everyone will forget everything that's being said right now," he said.

Cuban added that if Musk can assuage advertisers' worries about content moderation and also retain users, Twitter's reduced cost base could put it in a better position than before Musk took the reins.

The tech entrepreneur, who sold his Broadcast.com startup to Yahoo for $5.7 billion in April 1999, predicted in June that rising prices, higher interest rates, and recession fears would lead to a painful shake-out in equities and digital assets.

"In stocks and crypto, you will see companies that were sustained by cheap, easy money — but didn't have valid business prospects — will disappear," he said.

Cuban has previously compared the day-trading boom during the pandemic to the dot-com bubble, and warned crypto investors not to borrow more than they can afford, or they're almost guaranteed to lose everything.