Late last week, as revelations about the National Security Agency's telephone and internet data gathering programs splashed across the news, attorney Michael Overly heard from one of his clients, a consumer product company that had been looking at moving email systems to a cloud service provider. They'd decided to put their cloud project on hold.

"They are simply concerned about their data being accessed by a third party without their knowledge or consent," says Overly, a partner in the information technology practice at the Los Angeles firm Foley & Lardner. "They have all kinds of things that they're working on, and they don't want that information used unless they understand who's using it."

Overly couldn't name the company, but their issue was with a top-secret NSA project called Prism. Over the weekend, the Guardian produced a NSA document claiming that $20 million Prism program gave the government direct access to systems at nine technology companies – including Apple, Google, Facebook, and Microsoft. Those companies maintain that the government has no direct access to their systems.

Nevertheless, the Prism and other NSA surveillance revelations, has caused angst amongst Silicon Valley's technologically literate and privacy sensitive workers. For much of Sunday and Monday, the NSA's surveillance program was the top topic on Hacker News, the web site that serves as both sounding board and news site for the tech industry's geek community.

That's remarkable, when you consider that Monday marked the launch of Apple's Worldwide Developer Conference. "Even Apple was only able to make the top of front page for a short time," wrote one of the site's commentors on Monday. "This is [Hacker News] and Apple's latest news is not the top story. It's like I'm on a completely different site."

We know more today than we did last week about Prism. The Director of National Intelligence says it's not the widespread data-mining operation that some initially feared it to be. And with a mere $20 million price tag, it's clear that this is not a massive widespread data mining project. But the top secret nature of the program – and the lack of details about how it operates – still have people wondering.

"Everybody is just kind of wait-and-see right now," says Alex Stamos, chief technology officer with security consultancy Artemis Internet. He says that many tech industry friends are concerned about Prism and the level of the NSA's surveillance. "If it comes out that their employers were doing more than the minimum legal environment, then that's going to be problematic."

Reached Monday, an employee of one of the companies named in the NSA slides said he was too paranoid about government surveillance to say how he felt – even anonymously. "Do you really think I feel comfortable giving my opinion?" he said before declining to comment further.

The Chief Architect of Google+, Yonatan Zunger, said that his company didn't hand over information about users without warrants, but he had harsh words for the NSA. "Whatever the NSA was doing involving the mass harvesting of information, it did not involve being on the inside of Google," he wrote in a Google+ post. "And I, personally, am by now disgusted with their conduct: the national security apparatus has convinced itself and the rest of the government that the only way it can do its job is to know everything about everyone. That's not how you protect a country. We didn't fight the Cold War just so we could rebuild the Stasi ourselves."

Whatever Prism turns out to be, its public disclosure has brought attention to an uncomfortable fact of life for many of these internet companies: they are in the business of collecting and analyzing personal information, and that information is often of great interest to intelligence agencies. "I don't actually believe that anyone at Google or Facebook or any ISP is being intentionally malicious," says Moxie Marlinspike – a computer security expert who until January worked at Twitter – a company that was not named on the NSA Prism slides. "However, they are sort of in the surveillance business."

Even if it turns out that Prism does nothing more than the government now says, the extreme secrecy around the FISA court orders and the widespread "upstream" data collection that is happening at internet backbones is worrying to some. U.S. citizens may be exempt from FISA surveillance, but foreign workers in the U.S. and companies that are based overseas don't enjoy these protections.

"I think there's a real legitimate concern, that this is going to have a real impact on the growth of American internet companies," says Stamos. "We're already starting to rethink our cloud hosting strategy because we have to serve international clients."

If companies simply stop trusting U.S. service providers because they feel that they cannot keep their data private, that could be a big problem for cloud vendors such as Google, Microsoft, Facebook, and others.

"There are a lot of unhappy people around the Valley right now," says another employee at one of the companies named in the Prism slides. He too spoke on condition of anonymity because of the sensitivity of the situation. "This goes against fundamental bedrock principles of what this country is founded upon."