* Indexes: Dow up 1.24%, S&P 500 up 0.36%, Nasdaq down 0.01%

* Declines in chip stocks offset by staples, healthcare

* Amazon ( AMZN ), Meta, Apple ( AAPL ) and Microsoft ( MSFT ) to report later this

week

* Coca-Cola, Boeing ( BA ) gain after quarterly results

(Updates with mid-session trading)

By Johann M Cherian and Ragini Mathur

July 28 (Reuters) - The benchmark S&P 500 edged higher in a

choppy session on Tuesday, as gains in other sectors offset a

decline in chip stocks ahead of key earnings reports from some

of Wall Street's "Magnificent Seven" companies.

Global markets have become increasingly volatile this month

as investors scrutinize the need for more corporate spending on

AI infrastructure such as semiconductors that underpinned strong

gains in chip stocks in the previous quarter.

Reflecting the volatility on Tuesday, the tech-heavy Nasdaq

was trading off session lows after hitting levels last seen in

late April earlier in the session.

Chip majors such as Micron slid 8.8%, Intel ( INTC )

shed 4.6%, while Nvidia ( NVDA ) wobbled and was last up 1%.

SanDisk ( SNDK ) fell 13%, while Dell and Seagate ( STX )

lost over 10% each.

The Philadelphia SE Semiconductor Index was down

3.5%, while Roundhill's Memory Exchange Traded Fund

fell 7.2% to an over two-month low.

Signs that Wall Street's biggest companies such as Alphabet

and Tesla are running out of cash to fund

their ambitions have also made markets nervous, while China

showcases cheaper AI models and deepens its presence in the

competitive semiconductor industry.

"Investors are becoming less willing to reward higher AI

spending on its own and are increasingly looking for progress in

earning a return on that investment," Brian Therien, a senior

analyst at Edward Jones, said.

When AI hyperscalers Amazon.com ( AMZN ), Meta,

Apple ( AAPL ) and Microsoft ( MSFT ) report earnings later this

week, investors will be keen to see if their investments, worth

over several hundred billion dollars, are yielding returns.

Concerns have also been compounded by AI companies striking

a slew of circular deals, such as the report on Nvidia ( NVDA )

providing roughly $250 billion in financing guarantees for

OpenAI as part of a massive data center project.

Investors instead favored more cash-laden tech companies.

Apple ( AAPL ) rose 0.8%, sending its market capitalization

briefly above $5 trillion for the first timeand making it only

the second company ever to achieve that milestone after Nvidia ( NVDA ).

At 12:10 p.m. ET, the Dow Jones Industrial Average

rose 648.32 points, or 1.24%, to 52,858.40, the S&P 500

gained 26.61 points, or 0.36%, to 7,439.79 and the Nasdaq

Composite lost 3.47 points, or 0.01%, to 24,928.61.

Eight of the sectors on the S&P 500 were higher, with

consumer staples, materials and healthcare

up over 2% each.

Dow component Coca-Cola gained 5.5%, as the beverage

company raised its annual revenue and profit forecasts.

Boeing ( BA ) gained 4.6% after the airplane maker generated

positive free cash flow as its turnaround plans gained momentum.

The Federal Reserve is due to announce its interest-rate

decision on Wednesday. Traders see a 28% chance of a rate hike

this week, according to LSEG data, and expect borrowing costs to

rise by at least 25 basis points by year-end.

Higher rates could further pressure AI companies that are

becoming more dependent on debt financing.

Corning tanked 15% after third-quarter sales forecasts

missed estimates, while contract research firm IQVIA Holdings ( IQV )

added 13% after lifting its annual profit forecast.

Oil prices also offered some broader relief, falling 5.5% to

$83.5 a barrel on hopes that tensions in the Middle East and in

Ukraine would ease as the White House hosted Israel's Benjamin

Netanyahu and Kyiv's Volodymyr Zelenskiy.

Advancing issues outnumbered decliners by a 1.56-to-1 ratio

on the NYSE. Declining issues outnumbered advancers by a

1.06-to-1 ratio on the Nasdaq.

The S&P 500 posted 62 new 52-week highs and one new low,

while the Nasdaq Composite recorded 149 new highs and 166 new

lows.