(Adds comments in paragraph 6, updates with closing prices)

By Junko Fujita

TOKYO, July 15 (Reuters) - Japan's Nikkei share average rose

on Wednesday, as chip-related shares rallied after Wall Street's

solid overnight finish and chip equipment maker ASML's strong

outlook.

The Nikkei closed 1.49% higher at 68,751.51, and the

broader Topix rose 1.22% to 4,088.12.

The S&P 500 and the Nasdaq advanced on Tuesday, as solid results

from big banks and a cooler-than-expected inflation report

boosted risk appetite amid rising tensions in the Middle East.

The U.S. semiconductor index, a barometer for

Japanese chip-related shares, rose 2.54%.

ASML raised its financial forecasts for 2026 during

Asian trading, and said it would expand capacity after reporting

better-than-expected second-quarter earnings, driven by AI

demand.

"The market was relieved that the earnings of ASML was

strong," said Fumio Matsumoto, chief strategist at Okasan

Securities.

"But investors are not fully confident about a comeback of a

strong rally of AI stocks, and they will probably continue to

adjust positions between sectors."

The tech-heavy Nikkei's rally paused last month on global

concerns over overvaluation of technology stocks, but sentiment

remained strong as investors shifted their focus to value

stocks, such as financials.

On Wednesday, ASML's peer Tokyo Electron rose 4.37%, and

chip-testing equipment maker Advantest ( ADTTF ) was up 5.83%.

Financial stocks rose, with Mitsubishi UFJ Financial Group ( MUFG )

and Nomura Holdings ( NMR ) gaining 2.69% and 4.7%,

respectively.

Shares of system developers fell following a 25% decline in IBM

overnight after the U.S. company warned second-quarter

revenue would fall below estimates.

NEC and Nomura Research fell 4.32% and

2.51%, respectively, while computer maker Fujitsu ( FJTSF ) lost

4.7%. Consulting firm BayCurrent ( BYCRF ) fell 6.79%.

SoftBank Group fell 3.26%, weighing most on the

Nikkei. Uniqlo-brand owner Fast Retailing ( FRCOF ) slipped

0.49%.