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.
That is basically what Walmart does. Sometimes they even price their goods below cost to eliminate competitors. The vast majority of this is legal, and when it's not, someone screwed up (rather than intentionally broke the law) or the law was fuzzy to begin with. It's been a very successful strategy over the years, to say the least, particularly for the shareholders.
Following your logic, you must believe that either Walmart is an "unethical company on a vendetta" or Intel's management is much less capable than Walmart's.
Or they're both wrong and there are other reasons besides incompetence and the boy scout pledge for why Intel does not compete more aggressively against AMD.
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