(Updates after China markets open)

* SK Hynix ( SKHY ) earnings fail to soothe anxiety after sharp

selloff

* Eyes on slate of big tech earnings in test of AI trade

* Dollar stands tall ahead of delicately poised Fed decision

* Oil prices jump on fresh attacks in Middle East

By Ankur Banerjee

SINGAPORE, July 29 (Reuters) - Asian stocks slid on

Wednesday extending a brutal selloff as anxiety about AI

valuations, rising competition and spending rocked markets ahead

of crucial earnings from big tech firms and a U.S. Federal

Reserve policy decision.

Oil prices jumped after fresh attacks in the Middle East

shattered the relative calm of recent days in the U.S.-Iran war

as investors fret about the impact of depleting supplies on

prices and global rates.

Asian chipmakers have been at the epicentre of this year's

AI-driven rally and, more recently, investor concerns about its

staying power, sparking sharp market swings.

South Korea's KOSPI fell 5%, reversing earlier gains

after sinking more than 10% to a three-month low on Tuesday,

despite strong earnings from SK Hynix ( SKHY ).

Shares of SK Hynix ( SKHY ) fell 9% as investors digested

earnings that showed the chipmaker increased quarterly operating

profit more than sixfold but missed lofty expectations.

"With the FOMC meeting sandwiched between major U.S. tech

earnings this week, and expectations for AI capex already

elevated, investors appear to be taking some risk off the table

ahead of a critical test for both AI spending expectations and

market liquidity," said Gary Tan, portfolio manager at Allspring

Global Investments.

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

slipped 1% after shedding 3.6% on Tuesday and

was set for a monthly drop of 8%. Japan's Nikkei fell 1%

and is bracing for a more than 10% drop in July.

Earnings from the "Magnificent Seven" members Microsoft ( MSFT )

and Meta later in the day will be a key test

of the AI trade, particularly after Alphabet and Tesla

spooked investors last week with negative cash flow

reports.

Nick Twidale, chief market strategist at ATFX Global in Sydney,

expects another tough day for Asian equities, while the news

from the Middle East is also expected to weigh.

"I think the risk of a Fed hike will also concern investors, so

rather than a more usual pre-Fed quieter market, I've got a

feeling it could be a volatile day ahead," he said.

Nasdaq futures were choppy in Asian hours and were last

up 0.5% while European futures pointed to a higher

open. Hong Kong's Hang Seng index rose 1.5% while China's

blue-chip index was flat.

OIL JUMPS AHEAD OF FED MEETING

Brent futures jumped 3% to $86.80 per barrel while U.S.

West Texas Intermediate (WTI) crude rose more than 3% to

$81.95 after U.S. Central Command said Iran had launched

multiple ballistic missiles that were successfully intercepted.

"The latest attack highlights that the two sides remain a

long way from resolving the core dispute of passage through the

Strait of Hormuz that caused the earlier MOU to collapse," said

Tony Sycamore, market analyst at IG.

Iran effectively shut the key waterway to ships other than its

own after the U.S. and Israel launched strikes on February 28. A

deal last month between Washington and Tehran partially reopened

it, but the agreement collapsed in early July after Iran fired

on ships using a channel it had not approved.

That has again put inflation pressures in the spotlight ahead of

the Federal Reserve's policy decision due later on Wednesday.

The U.S. central bank is seen as more likely to leave interest

rates steady even as a growing number of its policymakers fret

openly about inflation.

The decision remains unusually hard to call under the

no-guidance regime adopted by the new Fed Chair Kevin Warsh,

with traders pricing in a 33% chance of a hike. The U.S. dollar

was perched near a one-month high ahead of the decision.

"We think the market may once again be underestimating the

extent of the hawkish shift at the Fed, and that the (for now)

moderate increase in energy prices may tip an already finely

balanced meeting in favour of a hike this week," said Frank

Flight, head of macro strategy at Citadel Securities.

"We acknowledge that it is a close call, but we now see a

rate hike at the July meeting," Flight said.