Updates with closing prices

By Stephen Culp

NEW YORK, Oct 6 (Reuters) - The S&P 500 and the Nasdaq advanced on Monday, as artificial intelligence-related dealmaking boosted investor sentiment even as the U.S. government shutdown extended through its sixth day.

The Nasdaq and the S&P 500 reached record closing highs, while the blue-chip Dow inched lower.

Chips took the lead after AMD AMD.O said it would supply AI chips to OpenAI in a deal that could generate tens of billions of dollars in yearly revenue and would allow the ChatGPT creator to buy a stake of up to 10% in the chipmaker.

AMD surged 23.7%, while the broader Philadelphia Semiconductor Index rose 2.9%.

"The market is seeing some strength in areas like technology and consumer discretionary and it's flying in the face of the government shutdown," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. "The market is still interested in the AI trade and the companies that support and use it."

"It's a wave and waves don't go on forever; it will eventually crest and decline," Pavlik added. "But where are we this cycle of the wave? It's impossible to know."

The federal government remained shuttered for the sixth day as lawmakers idled in a partisan impasse. The shutdown has postponed the release of key economic indicators, forcing investors to rely on secondary, non-government data to gauge the timing and extent of Federal Reserve interest rate cuts.

Monetary policymakers have cautioned against rushing to lower the Federal Funds target rate as inflation remains high, while others believe signs of softness in the labor market merit rate cuts.

Financial markets have priced in an all-but-certain 94.6% chance of a 25 basis point interest rate reduction at the conclusion of the Fed's October meeting.

Without new U.S. government data this week, market participants are monitoring reports on outstanding consumer credit, mortgage demand and the University of Michigan's preliminary take on October consumer sentiment.

The Dow Jones Industrial Average .DJI fell 63.31 points, or 0.14%, to 46,694.97, the S&P 500 .SPX gained 24.49 points, or 0.36%, to 6,740.28 and the Nasdaq Composite .IXIC gained 161.16 points, or 0.71%, to 22,941.67.

Among the 11 major sectors of the S&P 500, consumer discretionary .SPLRCD led the gainers, while real estate .SPRLCR suffered the steepest percentage decline.

Next week, third-quarter earnings will provide market catalysts as the reporting season gets underway with results from large U.S. banks.

Analysts estimate aggregate year-on-year S&P 500 earnings growth of 8.8% for the July-to-September period, up 0.8 percentage points from projections at the beginning of the third quarter, according to LSEG data.

Tesla TSLA.O advanced 5.5% after the electric carmaker teased an event scheduled for Tuesday on social media platform X over the weekend.

TD Cowen cut its Starbucks SBUX.O price target, citing a weakening labor market affecting Generation Z, sending the coffee chain's shares down 5.0%.

Bitcoin BTC= breached the $125,000 mark on Sunday, sending crypto-related firms Coinbase COIN.O, Strategy MSTR.O, Riot Platforms RIOT and MARA Holdings MARA.O all gained ground.

Regional bank Comerica CMA.N gained 13.7% after Fifth Third FITB.O said it will buy the company in an all-stock deal valued at $10.9 billion.

Verizon VZ.N shares dipped 5.1% after the telecommunications company named former PayPal PYPL.O boss Dan Schulman as its new chief executive officer.

Advancing issues outnumbered decliners by a 1.05-to-1 ratio on the NYSE. There were 665 new highs and 75 new lows on the NYSE.

On the Nasdaq, 2,602 stocks rose and 2,062 fell as advancing issues outnumbered decliners by a 1.26-to-1 ratio.

The S&P 500 posted 46 new 52-week highs and nine new lows while the Nasdaq Composite recorded 187 new highs and 58 new lows.

Volume on U.S. exchanges was 19.69 billion shares, compared with the 19.17 billion average for the full session over the last 20 trading days.

(Reporting by Stephen Culp; Additional Reporting by Niket Nishant and Sukriti Gupta in Bengaluru; Editing by Richard Chang)

((stephen.culp@thomsonreuters.com))