Tech stocks short-circuited Monday on reports that Silicon Valley’s top companies are facing unprecedented scrutiny of their business practices by government regulators perusing anti-competitive practices.
Google parent company Alphabet and Facebook both tumbled more than 6%, and Amazon dropped close to 5% on reports that the Justice Department and Federal Trade Commission are probing them over claims they have hindered the competition.
Facebook tumbled 7.5% — its biggest one-day drop in nearly a year — after the Wall Street Journal reported that the FTC has secured the right to examine how the social media company’s practices affect digital competition.
Alphabet, meanwhile, slid 6.1% after sources told Reuters that the Justice Department is preparing an investigation to determine if its dominance of the internet came about unfairly.
Amazon slipped 4.6% after it emerged that the FTC is taking over responsibility for probing the e-commerce giant’s business practices.
Not even Silicon Valley juggernaut Apple escaped the mayhem. The iPhone maker had been trading in the green for the first half of the day as investor excitement grew for its annual developers conference — but finished down 1% on reports that the Justice Department had called dibs on investigating the gadget-maker for anti-competitive practices.
Adding fuel to the fire, House Democrats announced that they would begin a review of Silicon Valley’s tech giants to see if their size has stifled competition and hurt consumers, according to the Washington Post, which is owned by Amazon boss Jeff Bezos.
Facebook is already bracing to be hit with a record-setting FTC fine as high as $5 billion over privacy lapses.
Investors ripped roughly $5 billion from the personal pocketbooks of Bezos and Facebook Chief Executive Mark Zuckerberg and tore $40 billion from their companies’ market caps — as calculated by shares outstanding.
Google founders Larry Page and Sergey Brin, meanwhile, each lost a cool $3 billion as investors shaved Alphabet’s market capitalization by $50 billion.
“The concerns that the government is going to get involved and possibly break these companies up or impose fines on their operations is a major concern here,” said Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC in New York.
“It is very rare to break up a company but not unheard of,” Bank of America Merrill Lynch analyst Justin Post said in a report that noted that the process could be time-consuming.
“To break up Google, the DOJ would likely have to file a lawsuit and convince judges that Google has undermined competition,” he said.
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The potential investigations follow accusations by President Trump against social media companies like Google and Facebook, claiming that they have suppressed conservative voices on their platforms online.
With Post wires