SHANGHAI, May 26 (Reuters) - China stocks fell on Friday, as investor sentiment was broadly subdued with market focus on the Sino-U.S. tensions, despite a rally by semiconductor shares following U.S.-based Nvidia's share price surge overnight.

** China's blue-chip CSI300 Index lost 0.4% by the lunch break, while the Shanghai Composite Index edged 0.1% lower.

** Hong Kong market was closed on Friday for public holiday.

** The U.S. State Department warned on Thursday that China was capable of launching cyber attacks against critical infrastructure, including oil and gas pipelines and rail systems, after researchers discovered a Chinese hacking group had been spying on such networks.

** Meanwhile, U.S. Commerce Secretary Gina Raimondo and Chinese Commerce Minister Wang Wentao traded barbs on trade, investment and export policies in talks on Thursday described by Raimondo's office as "candid and substantive."

** Sector performances were mixed with chipmakers outperforming other sectors. Shares of Chinese chipmakers jumped after a 24% overnight surge in U.S.-based Nvidia Corp fuelled Chinese interest in the sector.

** The STAR Chip Index was up 2.9%, on track for its best day in a month.

** Zbit Semiconductor Inc surged as much as 20% to hit a record high.

** New energy shares slumped 2.5%, continuing the downward trend.

** Automobile shares lost 1.2%, with BYD Co Ltd and Great Wall Motor Co Ltd down 4% and 4.2%, respectively. Great Wall Motor said on Thursday its rival BYD failed on hybrid emissions.

(Reporting by Shanghai Newsroom; Editing by Sherry Jacob-Phillips)