The CNET tech index lost 19.46 to close at 3,294.62, dragged down by shares of eBay and Priceline.com.
Losers edged out winners, with 66 of the 100 stocks in the index falling, 31 rising and three remaining unchanged.
Of the 18 sectors tracked, Internet e-tailers and server software makers posted the sharpest drops, falling about 6 percent each. An article in Barron's said many Internet companies will soon run out of cash.
Wireless companies were the day's largest gainers, climbing 3 percent.
In the broader markets, the Nasdaq composite index lost 188.13, nearly 4 percent, to 4,610, and the Standard & Poor's 500 index dropped 7.84 to 1,456.63. The Dow climbed 85.01 to close at 10,680.24.
Intel closed up $5.13 at $135; Microsoft inched down $2 to $97.38.
Collateral Therapeutics, a biotech research firm, was the biggest percentage gainer on the Nasdaq. The shares jumped $14.44, or 56 percent, to $40.19. Volume topped 2.2 million shares. The company unveiled successful clinical trial results of a nonsurgical gene therapy that causes the heart to grow new blood vessels.
MicroStrategy was the Nasdaq's largest loser, falling $140, or 61 percent, to $86.75 on a volume of 17.2 million shares. The maker of data-delivery software said a new way of booking sales will reduce two years of financial results and hurt first-quarter earnings.
Among members of the CNET tech index, America Online, AT&T and Hewlett-Packard posted gains.
HP rose $5 to $144. The company said that it has settled six patent infringement lawsuits with Xerox. The copier maker's stock rose 19 cents to $26.
AOL rose $2.13 to $66.88, and AT&T rose $3.63 to $56.81. Industry observers said that the two companies may benefit from new Internet tax laws.
Shares of eToys fell $1.69, or 12 percent, to $11.94. Barron's predicted the e-commerce toy company will run out of cash in less than 12 months.
Shares of Priceline fell $12.31, or 13 percent, to $77.69 along with eBay, which dropped $22.81, or 10 percent, to $196.13. AOL said it will enter the business-to-business e-commerce sector, competing with the two companies.
The Philadelphia semiconductor index fell 51.38, or 4 percent, to 1,203.45, led by chip designer Rambus, which lost $76.59, or 19 percent, to close at $317.03.
Shares of 3Com rose 56 cents to $68.56. 3Com will announce plans today to shed parts of its networking business to Extreme Networks and Motorola as part of a restructuring plan.