Yes, they could do exactly what you suggest, they could kill AMD in short order. That would be the actions of an unethical company on a vendetta instead of an ethical company with the shareholders interests in mind.
wmbz, Intel already engaged in price war with AMD in 2001. During that period the stock lost 50% in price.
The loss from such operation will exceed AMD market cap 10 times.
No doubt Intel will do something against AMD in the next 12 months, but I doubt the good old price war is possible. For example this EE scum at the A64 launch was quite effective. They made everyone seriously benchmark it. If I knew what exactly they gonna do, I would be rich now.