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* Alphabet gains on unveiling Gemini AI model

* Advanced Micro Devices up after AI-chip market forecast

* Weekly jobless claims lower than expected

* Indexes: Dow flat, S&P up 0.56%, Nasdaq up 1.01%

Dec 7 (Reuters) - The Nasdaq outpaced other major Wall Street indexes on Thursday as Alphabet shares surged, while investors looked forward to monthly payrolls data for clues on the Federal Reserve's policy actions.

Shares of the Google-parent were up 5% as investors cheered the launch of the company's most advanced artificial intelligence model called Gemini.

The communication services sector, housing Alphabet, advanced 3% and led gains among the 11 major S&P 500 sectors.

Other megacap stocks, including Amazon.com, Apple and Nvidia, rose above 1% each.

"It's basically a tale of two stock markets today -technology and everything else. They (Alphabet) don't rely on AI revenue, but it is accretive to earnings," said Ken Mahoney, CEO of Mahoney Asset Management in New Jersey.

Among other major movers, Advanced Micro Devices rose 7%, a day after the chipmaker estimated there was a $45 billion market for its data center artificial intelligence processors this year.

The tech-heavy Nasdaq has outperformed peers this year, surging 36% on a rally in megacap stocks that has been powered by enthusiasm around the potential for AI. Growing hopes of a cut in interest rates next year have also improved sentiment.

Reports showing weak private payrolls and job openings this week have reinforced expectations the Federal Reserve's furious pace of rate hikes is slowing the economy, potentially allowing the central bank to ease up on its monetary policy next year.

Traders have almost fully priced in the likelihood of the Fed keeping interest rates unchanged at its meeting next week and have nearly 64% odds for a rate cut as soon as March 2024, according to the CME Group's FedWatch tool.

However, some analysts have warned that markets have been too optimistic about rate cuts.

"The only way you get a rate cut is if GDP starts pulling back and there's softness in the jobs market," said Mahoney, adding that a significant slowdown in the economy will also hit company earnings.

The Labor Department's report, due on Friday, is expected to show that non-farm payrolls increased by 180,000 jobs last month after rising by 150,000 in October.

A separate reading showed initial jobless claims stood at 220,000 for the week ended Dec. 2, lower than the estimates of 222,000, according to economists polled by Reuters.

Meanwhile, comments from Bank of Japan Governor Kazuo Ueda added to growing speculation that the central bank could soon shift away from its ultra-easy monetary policy.

At 11:32 a.m. ET, the Dow Jones Industrial Average was down 3.16 points, or 0.01%, at 36,051.27, the S&P 500 was up 25.54 points, or 0.56%, at 4,574.88, and the Nasdaq Composite was up 143.11 points, or 1.01%, at 14,289.82.

Pressuring the Dow, shares of Merck fell 1.1% after the drugmaker's immunotherapy combination failed in a lung cancer study.

Advancing issues outnumbered decliners by a 1.96-to-1 ratio on the NYSE and by a 1.44-to-1 ratio on the Nasdaq.

The S&P index recorded 14 new 52-week highs and no new lows, while the Nasdaq recorded 50 new highs and 68 new lows.

(Reporting by Amruta Khandekar and Shristi Achar A; Editing by Saumyadeb Chakrabarty and Anil D'Silva)