NEW YORK, May 26 (Reuters) - The S&P 500 and Nasdaq hit record closing highs on Tuesday, as AI-fueled optimism offset anxiety over Middle East peace talks - concerns that were compounded by recent U.S. strikes on Iran. 

Semiconductor stocks, which have surged on AI-driven demand, led gains, with Micron gaining 19%, hitting $1 trillion in market value for the first time after UBS increased its price target on the stock to $1,625 from $535. 

Upbeat earnings and renewed confidence in AI trade have driven U.S. equities higher despite the ongoing conflict with Iran, with investors now turning their attention to IPOs of some of the largest private AI companies, including SpaceX.

"For those of us that have been working that long, the tech rallies we've been seeing this year are reminiscent of the boom at the end of the 1990s," said Chris Zaccarelli, chief investment officer for Northlight Asset Management. 

"It's also possible that some of the lessons that were learned after the tech bubble burst over 25 years ago will prevent the same thing from happening again."

The market took comfort from comments by U.S. Secretary of State Marco Rubio, who said that a deal with Tehran to halt the conflict could "take a few days," while Iran's Tasnim news agency reported that Tehran was seeking the release of $24 billion of Iranian funds frozen overseas.

"Even though we don't have an end of the war yet, there's a very high likelihood the situation will resolve itself in a peaceful fashion sooner rather than later," said Adam Sarhan, chief executive of 50 Park Investments.

"But the reality is that earnings are expected to grow even with high inflation. The economy is still growing, and the market is a mirror of the economy to a large extent."

The Dow Jones Industrial Average fell 118.02 points, or 0.23%, to 50,461.68, the S&P 500 gained 45.65 points, or 0.61%, to 7,519.12 and the Nasdaq Composite gained 312.21 points, or 1.19%, to 26,656.18. 

The S&P 500, the Nasdaq and the Russell 2000 touched intraday record highs on Tuesday, underscoring the strength of the recent rally. 

Brent crude futures climbed about 4% on Tuesday after the U.S. military carried out strikes in Iran, adding to uncertainty over whether a deal would be reached soon to end the war and open up shipping flows through the Strait of Hormuz.

Qualcomm rose almost 4.5% after Bloomberg News reported it reached a deal with TikTok owner ByteDance to supply chips, while Marvell Technology ended 6% higher. The Philadelphia SE Semiconductor Index hit an all-time high, gaining 5.5%. 

With the earnings season winding down, first-quarter earnings growth is expected to be 29% year-on-year compared with the 16.1% estimated a month ago, according to LSEG data from Friday. 

Advancing issues outnumbered decliners by a 2.47-to-1 ratio on the NYSE. There were 627 new highs and 90 new lows on the NYSE.

On the Nasdaq, 3,078 stocks rose and 1,785 fell as advancing issues outnumbered decliners by a 1.72-to-1 ratio. 

The S&P 500 posted 42 new 52-week highs and one new low while the Nasdaq Composite recorded 185 new highs and 70 new lows.

Volume on U.S. exchanges was 18.85 billion shares, compared with the 18.71 billion average for the full session over the last 20 trading days.