Leader Brandt Snedeker, who had a share of the lead after the opening round, is on 12 under par - one clear of fellow American Kevin Kisner.
Donald, five under par for the day, is 10 under, level with Americans Zach Johnson, Zac Blair and Chez Reavie.
Snedeker was third at last week's Tournament of Champions in Hawaii.
His short game helped him take the lead on day two as he holed out from 15 foot on his first hole, chipped in from 35 feet on his 12th, and then had a 20-footer at the next on the way to match Donald's five-under-par round of 65.
"This is why we spend so much time away from our families as well as so much time on the golf course - to be in contention and have a chance to win at the weekend," he said.
Fiji's Vijay Singh, 52, who is hoping to become the oldest winner on the PGA Tour, is four off the lead after a one-under round of 69.
Singh had shared the early lead with Snedeker, Kisner, Ricky Barnes and Morgan Hoffman after the quintet all hit 63s in their first round.
Padraig Harrington and England's Greg Owen are in a group six off the pace on six under but Northern Ireland's Graeme McDowell missed the cut by six shots on three over after a 73 on Friday.

The Conference Board's index of consumer attitudes fell by 8.3 points to 59.7 in March.
The research group primarily blamed the fall on the US federal budget cuts that came into force at the start of this month.
Separate data on Tuesday from the Commerce Department was more positive, showing a rise in durable goods sales.
Sale of such long-lasting factory products rose by 5.7% in February, the biggest increase in five months.
Yet the Commerce Department also said that sales of new US homes fell in February.
Sale of new residential properties fell to a seasonally adjusted 411,000 in February, 4.6% lower than the 431,000 sold in January, which had been a five-year high.
The government cuts - called the "sequester" cuts - came into force earlier this month. They were due to the federal government running out of funds before a new budget was finally agreed by the US Senate on 20 March.
"This month's retreat was driven primarily by a sharp decline in expectations, although consumers were also more pessimistic in their assessment of current conditions," said Lynn Franco, director of the Conference Board's economic  indicators.
"The recent sequester has created uncertainty regarding the economic outlook, and as a result consumers are less confident."

The way we work, play and live with robots is changing.
In a special series Ricky travels the country meeting the robots of the future and the scientists working on them.
From spending a night in a robot house to getting a brain scan, Ricky finds out how and why our relationship with robots is changing, fast.
Check out his first report here...
England's former world number one Luke Donald lies two shots off the lead at the halfway point of the Sony Open in Honolulu after a second-round 65.
[NEXT_CONCEPT]
US consumer confidence fell sharply this month, a closely-watched report has suggested.
[NEXT_CONCEPT]
They can walk, they can talk, and may soon be thinking for themselves.