Analyst Eric Ross chopped his stock price-target to $16 from $26 and his 2006 earnings estimate to $1.09 a share from $1.24.
In late morning trading, Intel shares fell 45 cents, or 2.2%, to $20.17.
The move marked his second downgrade of Intel this month. On Feb. 8, he lowered the chipmaker to accumulate from buy, a rating he had held for about one year.
'We believe Intel is having a tough February and will be unlikely to make it up in March,' Ross wrote. 'Demand for [Advanced Micro Devices Inc.'s] product continues to climb while demand for Intel product appears to be languishing.'
Rival AMD started to nibble into Intel's huge market share last year, boosted by a new set of chips that power corporate servers.
By the end of 2005, AMD had boosted its worldwide market share for chips used in computers and servers to 18.2% from 15.8% in 2004, according to preliminary data from Mercury Research.
Ross expects Intel will be forced to try to regain market share with price cuts, an event likely to hurt its profit margins.
As part of its 2006 product roadmap, Intel plans to roll out new server chips this spring. Chips for servers command wider profit margins than chips for desktop computers. Last month, the company started selling its next-generation chip for laptops, a fast-growing market that has helped Intel offset weaker desktop PC sales.
Other analysts have expressed concern about Intel of late.
In a research note last Friday, RBC Capital markets analyst Apjit Walia wrote that Intel is being affected by an ever-aggressive AMD, a product roadmap that is running into speed bumps, and a personal-computer market that is showing signs of exhaustion after 14 months of growth.
He slashed his price target to $21 from $29 and sliced his full-year earnings per share estimate to $1.18 from $1.26.
Of the 45 analysts that cover Intel, four have sell ratings, according to Thomson First Call. The others are Prudential Equity Group, First Albany, and Jyske Bank. This story was supplied by MarketWatch. For further information see www.marketwatch.com.