* Indexes mixed: Dow flat, S&P 500 down 0.6%, Nasdaq down

1.3%

* Netflix ( NFLX ) falls as earnings forecast disappoints Wall Street

* Intuitive Surgical ( ISRG ) falls on insurance coverage concerns

(Updates after markets open)

By Ragini Mathur and Avinash P

July 17 (Reuters) - The S&P 500 and the Nasdaq slipped on

Friday, as investors reassessed this year's AI-fueled rally,

deepening a selloff in chip stocks, while news of a new AI model

from China further soured sentiment.

After a blistering run that lifted main stock indexes to

record highs, investors have started to retreat from crowded

semiconductor trades over worries about the scale of AI-related

spending.

Chip stocks, broadly, extended the previous session's

weakness, with heavyweight Nvidia ( NVDA ) down 1.4%.

This decline combined with an early gain in Apple ( AAPL ),

pushed the iPhone maker ahead of Nvidia ( NVDA ) to briefly become the

world's most valuable company.

The Philadelphia SE Semiconductor index fell 1.8% and

was set for its worst week since March. The gauge has shed more

than 20% from its late June record high.

"It does feel very much a chip stock-driven move, just sort

of hurting sentiment more broadly." Fiona Cincotta, senior

markets analyst at City Index, said.

Chinese AI startup Moonshot unveiled Kimi K3, a 2.8

trillion-parameter model it said was the world's largest

open-weight AI, adding to investors' concerns over whether hefty

spending by heavyweights will deliver tangible results.

"The latest development is the competition from open source

models in China, which raised some competitive fears," Angelo

Kourkafas, senior global investment strategist at Edward Jones

Investments said.

"Supposedly, there are some offerings that are rivaling the

performance of Anthropic and OpenAI... potentially that is

contributing today to some of that weakness that started in

Asia."

All three main indexes were poised for weekly losses, as an

upbeat start to second-quarter earnings and benign inflation

data were overshadowed by concerns over the chip sector.

Netflix ( NFLX ) forecast third-quarter results below Wall

Street estimates, sending shares of the streaming giant down 9%.

The losses weighed heavily on the communication services sector

, which fell 2.4%.

The CBOE Volatility Index, Wall Street's fear gauge,

rose 1.30 points to 18.03 - the highest in more than a week.

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

rose 4.56 points, or 0.01%, to 52,557.53, the S&P 500

lost 43.71 points, or 0.58%, to 7,490.05 and the Nasdaq

Composite lost 323.79 points, or 1.25%, to 25,558.15.

The tech-heavy Nasdaq hit a three-week low earlier in the

session, before cutting some losses.

Risks from the Middle East conflict continued to loom large

as the United States struck bridges and an airport in Iran and

Tehran responded by hitting a power and desalination plant in

Kuwait.

U.S. consumer sentiment, however, increased to a five-month

high in July, but that is likely temporary as the renewed

U.S.-Iran tensions raises gasoline prices.

Among other movers, Intuitive Surgical ( ISRG ) shares slid

nearly 11.4% after the medical device maker kept its da Vinci

procedure-growth forecast unchanged and warned insurance-plan

changes may be delaying patient care.

Declining issues outnumbered advancers by a 1.24-to-1 ratio

on the NYSE and by a 1.55-to-1 ratio on the Nasdaq.