Updates after markets open

By Ragini Mathur and Avinash P

July 20 (Reuters) - Wall Street's main indexes rose on Monday, led by recovering chip stocks, while investors awaited a key slate of earnings from major technology companies that have powered the market's AI-driven rally.

The second-quarter earnings season will pick up pace later this week, with reports due from several major companies, including Alphabet GOOGL.O, Tesla TSLA.O, Intel INTC.O and IBM IBM.N.

Investors will closely watch earnings from Intel and Texas Instruments TXN.O for signals on whether the semiconductor sector can regain momentum after a sharp pullback.

A surge in AI capital spending by hyperscalers has been a major driver behind this year's market gains, lifting chip stocks and other companies that are seen as the beneficiaries of the buildout, and helping Wall Street climb to record levels.

But last week's selloff raised concerns that the rally had run too far.

The Philadelphia SE Semiconductor Index .SOX ended Friday more than 20% below its late-June record high, confirming a bear-market decline. The gauge was up 2.5% on Monday.

"There's just a little less room for error in the market at this point. Any sort of events or earnings news could probably move the market down," said Jack Herr, senior investment analyst at GuideStone Funds.

"As we move into the second half of the year, market expectations are higher than they were before."

Markets are expecting S&P 500 earnings growth of 26% for the second quarter, year-on-year, up from an earlier estimate of 23.7%, according to data compiled by LSEG.

At 09:50 a.m. ET, the Dow Jones Industrial Average .DJI rose 78.39 points, or 0.15%, to 52,224.81, the S&P 500 .SPX gained 44.81 points, or 0.60%, to 7,502.50 and the Nasdaq Composite .IXIC gained 234.45 points, or 0.92%, to 25,754.69.

Micron Technology MU.O and SanDisk SNDK.O were up 5.1% and 5.4%, respectively, and leading gains among chipmakers.

Meanwhile, Alphabet added 3.4% after a report said the Google-parent is developing new chips to run its AI models.

The information technology .SPLRCT and communication services sector .SPLRCL were leading gains on the benchmark S&P 500 .SPX.

Last week's declines in major U.S. indexes came despite benign inflation data that eased some concerns about a Federal Reserve rate increase this month, and a solid start to second-quarter earnings season from major U.S. banks.

Markets are pricing in about a 15% chance of a quarter-point rate hike at the Fed's July meeting, according to CME's FedWatch tool.

Investors were closely watching the developments in the U.S.-Israeli war with Iran after a recent escalation in the nearly five-month-old conflict stoked inflation fears.

Yemen's Iran-aligned Houthis said they were imposing a naval blockade on Saudi Arabia, a move that opens a new front in the Middle East war and increases the threat to global energy supplies and trade.

Among other movers, Domino's Pizza DPZ.O gained 3.6% after the pizza chain's quarterly revenue edged past Wall Street estimates.

Advancing issues outnumbered decliners by a 1.14-to-1 ratio on the NYSE and by a 1.11-to-1 ratio on the Nasdaq.

The S&P 500 posted eight new 52-week highs and one new low, while the Nasdaq Composite recorded 31 new highs and 55 new lows.