* AI leads stocks higher, SK Hynix not far from $1 trln

market cap

* Dollar stands tall on rate hike wagers, safe-haven

demand

* Oil above $100/barrel as Iran war impasse weighs

* Trump-Xi meeting likely to dominate investors thoughts

(Updates to Asia late morning)

By Ankur Banerjee

SINGAPORE, May 14 (Reuters) - Stocks rose on Thursday,

powered by AI fervour that pushed South Korea's SK Hynix to the

brink of joining the trillion-dollar club, while the spotlight

was firmly on a high-stakes summit between U.S. President Donald

Trump and China's Xi Jinping.

Trump received a grand welcome at Beijing's Great Hall of

the People on Thursday as he opened talks with President Xi,

expected to focus on their fragile trade truce and flashpoints

such as the Iran war and arms sales to Taiwan.

Michael Strobaek, global chief investment officer at Lombard

Odier, said preserving the status quo may be the most the

Trump-Xi meeting can achieve.

"I think that, amid the uncertainties around the Middle East

ceasefire, that may be enough for now," said Strobaek, noting

expectations are low and groundwork for any major diplomatic

breakthroughs appears thin.

China's blue-chip stocks eased 1% after hitting

their highest level since late 2021 at the start of the session,

while the yuan rose to a three-year high against the

dollar as traders watched the headlines from the Trump-Xi

meeting.

STOCKS FLY ON AI

MSCI's broadest index of Asia-Pacific shares outside Japan

was 0.3%, hovering near the record-high hit last

week.

Japan's Nikkei was perched at a new all-time peak

with data showing AI-linked demand partly helped lift earnings

for Japanese firms. Seoul's KOSPI gave up its early

gains to trade flat on the day.

SK Hynix, one of the AI darlings in Asia, is on

the verge of reaching $1 trillion market cap, becoming the

second South Korean firm after Samsung to break into the

trillion-dollar club. SK Hynix stock is up over 200% this year.

European futures pointed to a strong open while

U.S. stock futures were up 0.13%.

Analysts though caution that the elevated oil prices and the

impasse in negotiations to end the war in the Middle East could

bring inflationary worries back into view.

"Markets are trying to run two playbooks at once: AI and

earnings says buy growth, but geopolitics and energy prices are

quietly re-writing the inflation trajectory in the background,"

said Charu Chanana, chief investment strategist at Saxo.

"While today's session may still follow the AI momentum, a

macro reality check remains likely from the Trump-Xi meeting."

Brent crude futures were slightly higher at $105.89

a barrel, while U.S. West Texas Intermediate futures fetched

$101.33 per barrel. Oil prices remain well above the

pre-war levels, fanning inflation worries worldwide.

DOLLAR GETS A LIFT FROM INFLATION DATA

In currencies, the U.S. dollar held on to its gains as

investors wagered the Federal Reserve's next rate move would be

a hike after hotter-than-anticipated inflation reports this

week.

U.S. producer prices posted their biggest gain since early

2022, following Tuesday's consumer price data that showed annual

inflation rose at its fastest pace in three years.

Higher inflation and stronger labour market data have led

some traders to price in the prospect of a potential rate hike

in the first half of next year even as many economists and

analysts continue to see a rate cut as the likely next move by

the U.S. central bank.

The euro bought $1.1716, near its lowest in a week.

Sterling was at $1.35282, leaving the dollar index

, which measures the U.S. currency against six others, at

98.458.

The yen fetched 157.88 per U.S. dollar, keeping

traders wary of fresh Tokyo intervention after recent sharp

spikes that sources say were driven by officials stepping in to

prop up the battered currency.

The two-year yield was at 3.9708%, down 1.9 basis

points but near the 1-1/2-month high it hit in the previous

session. The benchmark 10-year yield stood at

4.4629%, having touched close to a one-year high on Wednesday.