My company went from 1500 people to about 300 people in 1 year. Layoffs decimated the company, and eventually we were bought by a competitor. I have coworkers who were out of a job for 2+ years. One of my personal friends on H1B had to pump gas overnight, and transferred his balances between credit cards just to stay alive. Entire technology parks were abandoned wastelands.
Even worse was that the idea of "outsourcing" to India started up during this time. So not only we were losing our jobs, the thought was that we could possibly be losing our jobs forever, because why wouldn't the engineers in India be just as effective for 1/5 the price? The per-capita job loss in Silicon Valley was worse than Detroit in the 80s, and the job losses were so bad that the traffic on 101 was actually okay.
I honestly felt like my way of life was dead, I even went to the hospital for a panic attack. Take into considering that while the wages for software engineers were high, they weren't as high as they are now. I was making good money, almost 6 figures, and it felt like I might have to find a new job in less than 5 years. It felt like a very dire situation.
After a couple of years, things started to stabilize, and it didn't feel so dire. However, I think people who went through the bust like I did were naturally reticent about joining companies like Facebook, Google, Netflix, etc which were the next wave of companies that defined Silicon Valley so we missed out on a lot of upside.