CHICAGO (CNN/Money) - Technology stocks fell sharply Wednesday as an adjusted earnings forecast from Texas Instruments and a bearish analyst call on a pair of networking firms sparked heavy selling.

The Nasdaq Composite Index plunged 49.55, or 2.6 percent, to 1,823.88, according to preliminary results. The Amex Technology Index dropped 21.12 to 658.57, while the Morgan Stanley Technology Index slumped 15.45 to 419.19.

Among blue chips, Microsoft (MSFT: Research, Estimates) lost 82 cents to $27.55, IBM (IBM: Research, Estimates) shed $1.58 to $87.84, and Intel (INTC: Research, Estimates) dropped $1.13 to $27.66.

After a strong start to the month, tech shares have cooled off the last two sessions. Some analysts had cautioned that with the Nasdaq's rapid rise, tech shares could be in for a pullback. With the third-quarter earnings season approaching, investors are beginning to retreat from their bullish stance.

That was the case today with Texas Instruments (TXN: Research, Estimates), which plunged $1.90, or 7.5 percent, to $23.42 after the company narrowed its third-quarter earnings and revenue estimates.

There was more bad news in the chip sector. Micron Technology (MU: Research, Estimates) dropped $1.35, or 9.2 percent, to $13.35 after SoundView Technology Group downgraded the stock to "neutral" from "outperform," citing concerns about demand for its products in Asian markets.

Also, Xilinx (XLNX: Research, Estimates) fell $1.81, or 5.6 percent, to $30.29 after the company said it expects third-quarter revenue to be flat to slightly higher than the previous period.

The negative news flow from the sector sent the Philadelphia Semiconductor Index down 24.84, or 5.3 percent, to 441.89.

Networking stocks took a hit when Smith Barney downgraded Juniper Networks to "in line" from "outperform" and Nortel Networks to "underweight" from "in line," citing valuation concerns for both companies. Juniper (JNPR: Research, Estimates) shares fell 94 cents to $16.55, while Nortel (NT: Research, Estimates) finished 14 cents lower at $3.96.

Also in the networking sphere, 3Com (COMS: Research, Estimates) lost 29 cents to $5.66 after the firm said it will outsource all its manufacturing operations and cut 1,000 jobs worldwide.

Elsewhere, cell phone giant Nokia (NOK: Research, Estimates) continued to slide, falling 61 cents to $15.39 after UBS downgraded the stock to "neutral" from a "buy" rating, citing a limited upside until company sustainable sales growth becomes more visible.