Is it correct to use the term paranoia when expressing overrated reaction due to fear of something?
Paranoid doesn't mean an overreaction, as you now know. It means to be acutely suspicious, though the word is normally used to describe a disproportionate fear, like a phobia, which is probably where you got confused.
You could have said something like "You're too focussed on the potential for negative effects to see that the potential benefits are enormous".
To put that in a single word, I'd go with either technophobic or Luddite.