* KOSPI tumbles to three-month low

* Oil extends losses but yields steady

* Fed meeting is live, pricing implies 35% hike risk

(Updates with European prices, adds new analyst comment)

By Tom Westbrook, Ankur Banerjee and Sruthi Shankar

July 28 (Reuters) - World stocks fell to a one-month low on

Tuesday, as investors dumped chipmakers on concerns about

Chinese competition and funding of the AI boom, while rising

odds of a U.S. interest rate hike as early as this week further

dampened the mood.

Asian chipmakers were at the heart of Tuesday's selloff,

with South Korea's KOSPI diving more than 10% to a

three-month low, triggering a circuit breaker on the way down as

it heads for its largest monthly fall on record and surpassing

declines suffered during the Asian financial crisis in 1997. The

index had more than tripled in value over the 12 months to June,

but it has shed more than a third of its value since that peak.

Shares in SK Hynix ( SKHY ) and Samsung Electronics ( SSNLF )

, which are under extra pressure in a market

transformed by leverage, made losses of more than 12% as their

stratospheric rally unwinds in a hurry.

Wall Street looked set for a weaker open as Nvidia ( NVDA )

and Micron Technology's ( MU ) shares fell in premarket

trading. Nvidia ( NVDA ) shares had already shed 5% overnight after the

Wall Street Journal reported the company was in talks to provide

roughly $250 billion in financing guarantees for OpenAI as part

of a massive data centre project.

European stocks outperformed as positive earnings reports

from Unilever ( UL ) and Mercedes-Benz helped offset

losses in technology stocks.

The MSCI All Country World Price index fell

0.5% to its lowest since June 29.

"You've seen the companies paying for AI, the hyperscalers,

not really participating because of concerns about the cost and

the degree of leverage that needs to be taken on. And now we're

seeing questions over the profitability of the semiconductor

space, particularly in Asia," said Dorian Carrell, head of

multi-asset income at Schroders.

"The broader AI story has some way to go, but these kinds of

(profit) growth rates are rarely sustained. We think that it's

healthy that the market's questioning these things."

China has begun manufacturing domestically developed

immersion deep ultraviolet lithography machines, a chipmaking

tool long dominated by Dutch supplier ASML, The

Information reported on Monday, sending ASML shares down 8.5%.

China's CXMT Corp, the world's fourth-biggest

memory maker, listed and raised $8.6 billion on Monday, too,

ending its debut session as China's most valuable company.

OIL SLIDES, US RATE HIKE EYED

Brent crude futures extended Monday's nearly 9% plunge, falling

more than 3% to $85.55 a barrel, as a lull in hostilities

between the U.S. and Iran followed Washington's abrupt

suspension of air strikes on Saturday.

President Donald Trump said on Monday the United States was

having "good talks" with Iran and there was a chance of a deal.

The break in fighting pushed down benchmark 10-year U.S.

Treasury yields by about 4 basis points to 4.64% on

Monday, but hardly budged shorter-term rates.

Markets have priced about a 35% chance that the Federal

Reserve hikes by 25 basis points on Wednesday.

"The U.S.-Iran war, by propelling the price of crude oil,

remains the most important determinant of what will happen to

the global economy ... and, by extension, what informs central

bank policy outlooks, at the margin," said Thierry Wizman,

currency and rates strategist at Macquarie Group.

"We expect that the (Fed) this week will wish to adopt a

tightening bias."

Expectations for hikes sooner or later kept the dollar

supported, holding the euro below $1.14 at $1.1370. The

yen traded at 163.83 to the dollar, barely above a

four-decade low, with markets on edge about Japan intervening in

the currency pair - particularly if the Bank of Japan leaves

rates on hold this week and sets off another yen slide.

"If BOJ communication is not hawkish enough and USD/JPY

heads higher, traders should anticipate an official response,

including verbal intervention, rate checks, or even direct FX

market intervention, perhaps on Friday," said Wizman.

(Reporting by Tom Westbrook and Sruthi Shankar; Editing by Shri

Navaratnam, Saad Sayeed, Amanda Cooper and Anil D'Silva)