US STOCKS-S&P 500, Nasdaq set for weekly fall as chip stocks slide

* Indexes up: Dow 0.08%, S&P 500 0.23%, Nasdaq 0.28%

* OpenAI considering to hold off IPO until next year - report

* Philadelphia chips index set for worst week since March 2025

* Healthcare, Staples gain offset tech weakness (Updates with afternoon trading levels)

By Shashwat Chauhan and Joel Jose

June 26 (Reuters) - The S&P 500 and the Nasdaq were set for weekly losses on Friday, as chipmakers hit a rough patch after a stellar run this quarter, with investors questioning high valuations and the repercussions of massive AI spending by companies.

All three main indexes were subdued in choppy trading. The Nasdaq was on pace for a more than 4% drop for the week and the S&P 500 was set for an over 1% fall as high-flying chipmakers remained under pressure despite strong earnings from market darling Micron Technology (MU).

The memory chipmaker slid 2.2% after jumping more than 15% in the previous session. Other chip stocks, including Advanced Micro Devices (AMD) and Nvidia (NVDA), were also reeling.

Ben Fulton, CEO of WEBs Investments attributed the weakness in semiconductor shares to profit taking, as "there's short-term opportunity trading happening and it's creating a lot of chaos in the market."

The Philadelphia SE Semiconductor index dropped 4.1%, set for its biggest weekly loss in over a year. The index has surged more than 87% so far this year amid insatiable AI demand hopes.

Apple (AAPL) shares edged up 0.7% after a 6.1% slump in the last session, their biggest one-day drop in over a year after it raised iPad and MacBook prices on Thursday to make up for soaring memory and storage chip costs.

U.S. inflation rose above 4% in May - the first time in three years - data showed on Thursday, as the war with Iran drove up energy prices, keeping alive the possibility of a Fed rate hike.

While oil prices have retreated sharply as the Middle East tensions eased, Apple's (AAPL) shock move to hike prices drove inflation fresh concerns.

"We saw a similar dynamic during the pandemic, when supply chain disruptions limited access to semiconductors. Now, we're witnessing a comparable supply shock, this time driven by memory, which is creating renewed inflationary pressure," said Art Hogan, chief market strategist at B. Riley Wealth.

At 12:35 p.m. ET, the Dow Jones Industrial Average rose 42.18 points, or 0.08%, to 51,962.80, the S&P 500 gained 17.25 points, or 0.23%, to 7,374.74 and the Nasdaq Composite gained 70.60 points, or 0.28%, to 25,429.21.

A report that OpenAI was considering delaying its public debut until next year also weighed on risk sentiment towards the tech space.

Some losses were offset by defensive sectors, including healthcare, up 2.4%, and consumer discretionary , which advanced 1.7%.

Recent market volatility has driven investors toward overlooked sectors poised to benefit from easing inflation concerns and stronger growth prospects.

Cooling tensions in the Middle East have further helped lift the blue-chip Dow, set for a 1% rise this week, to record highs.

Investors expected heavy trading volume on Friday to reflect changes to the Russell indexes, including reclassification for megacaps like Microsoft and the Russell 1000's "fast-track" addition of SpaceX.

Meanwhile, interest rate anxiety persisted, with traders pricing in one 25-basis-point rate hike and a near-27% chance of another by year-end, according to LSEG-compiled data. A survey showed U.S. consumer sentiment rebounded from record lows in June, though households remained worried about the high cost of living.

ON Semiconductor dropped 23% after saying it agreed to acquire Synaptics (SYNA) in an all-stock deal valued at about $7 billion. Synaptics (SYNA) shares were last down 0.8%.

Advancing issues outnumbered decliners by a 1.55-to-1 ratio on the NYSE and by a 1.76-to-1 ratio on the Nasdaq.

The S&P 500 posted 26 new 52-week highs and 5 new lows while the Nasdaq Composite recorded 184 new highs and 131 new lows. (Reporting by Shashwat Chauhan, Joel Jose and Sruthi Shankar in Bengaluru; Editing by Joyjeet Das)