By Tharuniyaa Lakshmi and Johann M Cherian

European shares were flat on Tuesday as gains in consumer-related stocks offset a selloff in AI-linked technology stocks, while investors watched a NATO summit in Turkey for signs of higher defence spending.

The pan-European STOXX 600 index TVC:SXXP was up 0.1% at 650.99 points by 0854 GMT, after closing below record high levels in the previous session.

Investors focused on sectors that have been beaten down this year on concerns that inflation pressures from the Mideast conflict dampened consumer sentiment. Luxury stocks (.STXLUXP) gained 2%, consumer staples stocks such as personal & household goods (.SXQP) and food & beverage (.SX3P) added over 1.4% each, while auto stocks (.SXAP) gained 1.3%.

"It's part of a rotation to cheaper, less-loved, less tech-heavy sectors of the market. We're seeing much more of a broadening out rather than leadership from a narrow group of stock," said Kathleen Brooks, research director at brokerage XTB.

"I'm really looking (at) consumer staples... especially because of the decline in the oil price and the fact that, that's going to reduce the impetus for central banks to raise interest rates."

Tech stocks (.SX8P) lost 2.3% on concerns that a quarter-long rally in chip stocks had overvalued the sector. The second-quarter rally in Europe was also led by tech majors in the region.

French chip materials supplier Soitec EURONEXT:SOI tumbled 12%. Circuit board manufacturer AT&S VIE:ATS dropped 9.5% and Franco-Italian chipmaker STMicroelectronics EURONEXT:STMPA lost 5%.

Siemens Energy (ENR1N.DE) fell 7% after brokerage Barclays downgraded the AI equipment maker to "underweight" from "equal-weight".

Reflecting the gloom, South Korea's Samsung Electronics KRX:005930 shares slid despite strong forecasts and Nasdaq futures on Wall Street slipped nearly 1%.

Defence stocks (.SXPARO) declined following a surge earlier this month that put them among the top STOXX 600 gainers. The focus was on the NATO summit, where countries were anticipated to announce fresh deals in response to U.S. pressure to increase European defence spending.

Sweden's defence equipment maker Saab OMXSTO:SAAB_B gained 4.1% after brokerage Morgan Stanley upgraded the stock to "overweight" from "underweight". NATO also said that it will purchase up to 10 of the company's GlobalEye surveillance planes.

Among other deals was Canada selecting TKMS' unit to build up to 12 submarines for the navy, along with Kongsberg Gruppen OSL:KOG for its 212CD submarines.

Renault EURONEXT:RNO gained 2.2% after a report that China's BYD had twice explored taking a stake in the French carmaker.

Shell LSE:SHEL rose 3% after the energy giant slightly raised its second-quarter integrated gas outlook.