(Updates to midafternoon trading, adds analyst comment)

* Indexes down: Dow 0.56%, S&P 500 0.86%, Nasdaq 1.2%

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

* Intuitive Surgical ( ISRG ) slides on insurance coverage concerns

* Flaring Middle East tensions send energy stocks higher

By Stephen Culp and Ragini Mathur

NEW YORK, July 17 (Reuters) - Wall Street extended its

decline on Friday as a pullback on stocks associated with the AI

boom, which has driven much of the gains so far this year,

morphed into a larger risk-off sentiment.

Semiconductor stocks, which have led the broader market's

move in recent sessions, initially led the selloff, which

broadened as the session progressed.

All three indexes were on course to post weekly losses.

The Philadelphia SE Semiconductor Index was last down

1.0%, and remained on track for its steepest weekly loss since

early April, and has tumbled about 17% so far in July. Even so,

the index remains up 63.2% year-to-date, compared with the S&P

500's 10% gain over the same time frame.

Some investors in the artificial intelligence space have begun

positioning for a slowdown in the nearly trillion-dollar

spending boom, with some active managers already scaling back

their exposure, according to a Reuters analysis.

"The story is over for chips because the story is not over

for AI," said Sam Stovall, chief investment strategist at CFRA

Research in New York. "(Chips) have come so far, so over an

extended period, it's like an army that got too far ahead of its

supply lines and has to retreat and let the fundamentals catch

up."

Every member of the Magnificent Seven group of AI-related

megacaps dipped, with Meta and Alphabet

suffering the worst of it, down 2.7% and 3.2%, respectively.

The Dow Jones Industrial Average fell 290.49 points,

or 0.56%, to 52,260.46, the S&P 500 lost 64.87 points, or

0.86%, to 7,468.83 and the Nasdaq Composite lost 308.67

points, or 1.19%, to 25,573.27.

Among the major sectors of the S&P 500, communication services

and technology were down the most, while

energy stocks were the sole gainers, benefitting from

spiking crude prices amid signs of escalating hostilities

in the Iran war.

War equipment makers were also clear

outperformers.

Q2 EARNINGS SEASON GETS OFF TO AN UPBEAT START

Second-quarter earnings season is still in its early days,

with 49 of the companies in the S&P 500 having reported. Of

those, 90% have delivered better-than-expected results,

according to LSEG.

Analysts now see year-on-year S&P 500 earnings growth of

26.0%, on aggregate, up from the 19.2% expectations as of April

1, per LSEG.

Netflix ( NFLX ) tumbled 6.7% after the company's

weaker-than-expected earnings forecast, raising doubts about the

sustainability of the content growth momentum.

Uber Technologies ( UBER ) dropped 1.8% after the rideshare

app announced it would acquire Germany's Delivery Hero

in a deal worth nearly $15 billion.

Intuitive Surgical ( ISRG ) shares slid 13.1% after the medical

device maker kept its da Vinci procedure-growth forecast

unchanged and warned insurance-plan changes may be delaying

patient care.

On the economic front, consumer sentiment increased to a

five-month high in July, but single-family housing starts and

building permits dipped, and industrial output increased by a

meager 0.1%.

Declining issues outnumbered advancers by a 2-to-1 ratio on

the New York Stock Exchange. There were 241 new highs and 166

new lows on the NYSE.

On the Nasdaq, 1,792 stocks rose and 2,855 fell as declining

issues outnumbered advancers by a 1.59-to-1 ratio.

The S&P 500 posted 46 new 52-week highs and 4 new lows while

the Nasdaq Composite recorded 65 new highs and 169 new lows.