(Updates to midafternoon trading, adds analyst comments and

market details)

* Indexes: Dow up 0.29%, S&P 500 up 0.06%, Nasdaq off

0.05%

* Alphabet dips on plans to raise $80 billion for AI

buildout

* Marvell ( MRVL ) jumps on Nvidia's ( NVDA ) CEO calling it the next

trillion-dollar company

* Software shares down following a strong rebound rally

By Stephen Culp and Medha Singh

NEW YORK, June 2 (Reuters) - Wall Street stocks were

muted on Tuesday as risk appetite driven by AI fervor was

counterbalanced by tensions arising from U.S.-Iran talks to

reopen the Strait of Hormuz and end the months-long war.

Gains in seven of the 11 major S&P sectors kept the S&P 500

and the Dow afloat, with the small-cap Russell 2000

outperforming its larger-cap peers. The Nasdaq was nominally

lower.

Small-cap stocks have been some of the biggest beneficiaries

of the ongoing enthusiasm surrounding artificial intelligence

stocks, which provided some upside muscle, with the Philadelphia

SE Semiconductor Index advancing 4.6%.

The Software & Services Index, battered in recent

months over worries of AI disruption, was off 3.4%.

Strong results from Hewlett Packard Enterprise ( HPE ) and a

funding commitment from Alphabet reinforced confidence

in the AI buildout.

"It's a mixed market today with the S&P up slightly, but

mid-caps and small-caps are having a nice day, sort of for a

change," said Tim Ghriskey, senior portfolio strategist at

Ingalls & Snyder in New York.

Tehran is studying a U.S. proposal to bring the war to a

halt, but has not been in contact with Washington for days,

according to Iranian media, which also said Iran is taking a

"stern" approach, given what it views as a history of U.S.

noncompliance and mutual distrust.

Simultaneously, Israel is continuing its strikes on Lebanon,

despite Tehran's warnings that the attacks are threatening to

derail the fragile truce.

The war has sent crude prices soaring, reviving worries over

inflation and giving rise to an increasing likelihood that the

U.S. Federal Reserve could hike interest rates by year-end.

Cleveland Fed President Beth Hammack said on Tuesday that such a

hike could become necessary if already-elevated inflation

pressures continue to mount.

On the economic front, a report from the Labor Department showed

an unexpected spike in job openings, driven by the volatile

professional and business services sector. Otherwise, hiring,

firing and quits all decreased, suggesting a slowdown in labor

market churn in the face of uncertainties related to strife in

the Middle East and inflationary effects.

"If you talk to recent college graduates, you know they're

having a hard time getting jobs," Ghriskey added. "That's not

necessarily showing in the data, at least not yet."

Analysts look to the May employment report due on Friday,

which is expected to show the U.S. economy added 85,000 jobs

last month, a monthly deceleration of 26.1%. The unemployment

rate is forecast to stand pat at 4.3%.

The Dow Jones Industrial Average rose 149.01 points,

or 0.29%, to 51,227.89, the S&P 500 gained 4.85 points,

or 0.06%, to 7,604.81 and the Nasdaq Composite lost

13.96 points, or 0.05%, to 27,072.85.

Among the 11 major sectors of the S&P 500, utilities

were up the most, while communication services

suffered the steepest percentage loss.

Hewlett Packard Enterprise ( HPE ) jumped 15.5% after the AI server

maker pulled forward its long-term financial targets by two

years.

In further evidence of AI buildout, Alphabet said it

was looking to raise $80 billion in equity offerings, including

an investment from Berkshire Hathaway, to fund a costly

expansion of its AI infrastructure. Its shares slipped 2.5%.

Marvell Technology's ( MRVL ) shares surged 28.9% after Nvidia ( NVDA )

Chief Executive Officer Jensen Huang called the

chipmaker the next "trillion-dollar company" at the Computex

conference in Taipei. Nvidia ( NVDA ) invested $2 billion in Marvell ( MRVL ) in

March.

A 5.5% drop in bitcoin hit cryptocurrency firms.

Coinbase was down 4.9% while Strategy Inc ( MSTR ) sank

8.8%.

Broadcom ( AVGO ) reports quarterly results on Wednesday.

Advancing issues outnumbered decliners by a 1.42-to-1 ratio

on the New York Stock Exchange. There were 444 new highs and 118

new lows on the NYSE.

On the Nasdaq, 2,266 stocks rose and 2,469 fell as declining

issues outnumbered advancers by a 1.09-to-1 ratio.

The S&P 500 posted 25 new 52-week highs and 16 new lows

while the Nasdaq Composite recorded 117 new highs and 83 new

lows.