(Updates with afternoon trading levels, adds analyst comments)

* Indexes: Dow down 0.35%, S&P 500 up 0.54%, Nasdaq up 1%

* Russell 2000 hits intraday record, last up 1.6%

* Micron joins $1 trillion market-cap club after UBS

triples PT

By Saeed Azhar, Twesha Dikshit and Utkarsh Hathi

May 26 (Reuters) - The S&P 500 and the Nasdaq traded

near record levels on Tuesday, after briefly hitting fresh

intraday highs, as AI-fueled optimism offset concerns over

Middle East peace talks, which were compounded by recent U.S.

strikes on Iran.

Semiconductor stocks, which have surged on AI-driven demand, led

gains, with Micron jumping more than 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."

At 2:13 p.m. EDT, the Dow Jones Industrial Average

fell 175.28 points, or 0.35%, to 50,404.42, the S&P 500

gained 40.23 points, or 0.54%, to 7,513.70 and the Nasdaq

Composite gained 265.39 points, or 1.01%, to

26,609.36.

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 ( QCOM ) rose 3.6% after Bloomberg News reported it

reached a deal with TikTok owner ByteDance to supply chips,

while Marvell Technology ( MRVL ) rose 6%. The Philadelphia SE

Semiconductor Index rose 5% to an all-time high.

The S&P 500 information technology subindex was

leading gains with a rise of 1.5%.

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 2.27-to-1 ratio

on the New York Stock Exchange. There were 504 new highs and 82

new lows on the NYSE.

On the Nasdaq, 3,040 stocks rose and 1,761 fell as advancing

issues outnumbered decliners by a 1.73-to-1 ratio.

The S&P 500 posted 40 new 52-week highs and one new low

while the Nasdaq Composite recorded 174 new highs and 65 new

lows.