Nvidia Corp shares tumbled 10 percent on Thursday, as analysts slashed price targets after the graphics chipmaker cut its sales outlook.

Nvidia's slump helped drag chip stocks lower, with the Philadelphia Semiconductor Index <.SOXX> down 2.8 percent in midday trading.

Nvidia said cost increases led to a greater-than-expected shift to lower-priced graphics chips, as well as personal computers running lower-end integrated graphics. The company also cited economic weakness in Europe and China.

Nvidia now expects revenue of $800 million to $820 million in the quarter ending August 1, down from its estimate of $950 million to $970 million.

Nvidia shares fell 10 percent to $9.09 in midday trading on the Nasdaq.

FBR Capital Markets analyst Craig Berger downgraded Nvidia to market perform and lowered his price target to $10 from $18. He said Nvidia is trying to transition to a more expensive Fermi chip amid macroeconomic weakness that is also hurting PC production forecasts.

The magnitude of its guidance miss is surprisingly large, particularly given that Nvidia did not cite any chipset weakness, Berger wrote in a research note

Berger also downgraded Advanced Micro Devices Inc , which competes with Nvidia in the graphics chip market. AMD shares fell 3.9 percent on the New York Stock Exchange.

Nvidia has been shifting its focus to high-performance computing and mobile chips for devices such as tablet computers, while maintaining a core business selling graphics chips.

Wedbush analyst Patrick Wang slashed his price target on Nvidia to $10 from $15, noting looming competitive issues and a weakening in the market for discrete graphics chips.

Even after the significant negative update, we remain cautious on shares of Nvidia and do not believe things get any easier in the near future, Wang wrote in a note to clients.

Nvidia, AMD and poor results from chip maker LSI Corp helped drag down other semiconductor names.

The PHLX semiconductor index suffered its largest percentage decline in nearly two weeks, taking the index to just above its 200-day moving average.

The 200-day moving average, close to 347, served as resistance on July 20.

A close below 347 or 345 would imply we're heading back down to the bottom of the (recent) range, said Craig Peskin, co-head of technical analysis research at Concept Capital in New York.

(Reporting by Gabriel Madway and Rodrigo Campos; editing by Andre Grenon)