Tech stocks in the US fell heavily on Tuesday after news emerged that Facebook founder Mark Zuckerberg would be forced to testify before US Congress to explain how data from 50 million of his users ended up in the hands of a political consultancy.
The US market rose in early trade but when news about Facebook – and a possible Trump administration crackdown on Chinese investment in US tech – emerged, it undermined the whole tech sector.
The Dow Jones industrial average lost 1.43 per cent while the broader based S&P 500 closed down 1.73 per cent to 2612.6 points.
In the tech market things got really nasty. The tech rich NASDAQ index lost 2.93 per cent to close at 7008.8 points. Twitter was the biggest loser among the high profile tech players, off 12.8 per cent to $US27.80 ($36).
Facebook lost 5.8 per cent to $US151.68, pushing it down 17 per cent since early March and wiping $US10 billion off founder Mark Zuckerberg’s stake leaving it with a value of around $US64 billion. Facebook’s shares are down 16 per cent in a few weeks.
Amazon, Apple and Tesla all fell sharply on Tuesday and Netflix tumbled 6 per cent, its biggest decline in two years.
In Australia the market also tumbled, with the All Ordinaries Index losing 0.6 per cent to be trading at 5910.8 per cent in mid afternoon. Tech stocks are rare on the Australian market but emerging stocks (down 0.98 per cent) and telcos (down 0.74 per cent) were harder hit than the general index.
In the US tech bears were feeling vindicated. They point out that the FANG index’s (10 leading tech stocks including Facebook, Amazon, Netflix and Google) advance from early 2016 through this month’s peak reached an annualised rate of 67 per cent.
That outpaced even the Nasdaq returns in the final two years of the dot-com bubble which hit in 2000.
Lawmakers in the US and Europe are demanding to know more about the Facebook’s role consultancy Cambridge Analytica’s use of the data to target US and British voters in close-run elections.
Facebook said on Tuesday the company had received invitations to testify before Congress and that they were talking to legislators.
House Energy and Commerce Committee spokeswoman Elena Hernandez said: “The committee is continuing to work with Facebook to determine a day and time for Mr Zuckerberg to testify.”
On the same day, Mr Zuckerberg turned down British MPs’ invitations to explain to a British parliamentary committee what went wrong.
The company said it would instead send one of his deputies, suggesting that chief technology officer Mike Schroepfer or chief product officer Chris Cox had the expertise to answer questions on the complex subject.
The head of the committee called Mr Zuckerberg’s decision “astonishing” and urged him to think again.
The revelations have raised investor concerns that any failure by big tech companies to protect privacy could deter advertisers and lead to tougher regulation.
It was unclear when or before which committee Mr Zuckerberg would testify.
The US Senate Judiciary Committee said on Monday it had invited Mr Zuckerberg, as well as the CEOs of Alphabet Inc and Twitter Inc to testify at an April 10 hearing on data privacy.
The US Federal Trade Commission took the unusual step of announcing on Monday that it had opened an investigation into the company, which it generally only does in cases of great public interest, citing media reports that raise what it called “substantial concerns about the privacy practices of Facebook”.