NEW YORK (CNNMoney.com) - Shares of chipmaker AMD sank Thursday after an analyst cut his price target on the stock over concerns of an impending price war with Intel.

Citigroup analyst Glen Yeung slashed his price target on AMD (down $1.06 to $26.94, Research) from $42 to $33 on concerns that the company is "out of position" with respect to planned July price cuts from No. 1 chipmaker Intel.

The shares fell about 3.5 percent in heavy New York Stock Exchange trading.

His meetings with industry officials "uniformly suggest that Intel's forthcoming price cuts, scheduled for late July across Intel's entire desktop and notebook product lines, will drive share gain for the company," Yeung wrote in a note to clients.

AMD has been gaining market share in semiconductors against its much larger rival, whose stock has tumbled due to those market share losses and concerns about slowing demand for PCs. Yeung also lowered his estimates for Intel on concerns about weakening demand for PCs.

"Data points indicating a below seasonal (second quarter) are plentiful, creating a difficult unit backdrop for microprocessor companies," Yeung wrote.

Intel (down $0.25 to $17.14, Research) shares fell about 1 percent on Nasdaq.

The news follows a report Wednesday that semiconductor demand overall will be stronger than initially expected this year.

Demand for chips is now expected to jump 9.8 percent to about $250 billion this year, according to the Securities Industry Association, which issued the report. That's up from its earlier forecast of 7.9 percent in November.

The SIA cited high demand for consumer electronics, particularly cell phones, as the reason for the expected increase. But sales of chips for PCs are expected to grow at a much slower rate, up 4.3 percent, to about $36 billion.

Yeung does not own shares of AMD or Intel, but his firm has banking ties to both companies.

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