(Updates with closing levels.)

By Rocky Swift

TOKYO, June 24 (Reuters) - Japan's Nikkei share gauge fell

for a second day on Wednesday, as concerns over potential

interest rate hikes by the Federal Reserve and AI sector

valuations weighed on sentiment.

The benchmark Nikkei 225 slid 0.88% to close at

69,174.97, retreating further from a record high reached on

Monday. The broader Topix slipped 0.67% to 3,963.76.

The decline followed overnight losses in U.S. equities, where

the Philadelphia Semiconductor Index sank 7.9% amid

worries about debt-funded AI spending and tighter financial

conditions.

"Speculation that the Federal Reserve is moving toward

interest rate hikes has heightened concerns about rising

financing costs for AI capital expenditures, which appears to

have accelerated the decline in semiconductor stocks," Sony

Financial Group analysts said in a note.

There were 91 advancers on the Nikkei, 131 decliners, and

three unchanged.

Chip-related shares were among the laggards, with Tokyo Electron ( TOELF )

dropping 4.19% and Disco losing 3.78%.

Insurance stocks also fell sharply, led by T&D Holdings ( TDHOF )

, which slid 5.74%. On the upside, retail shares were

largely higher, with J. Front Retailing ( JFROF ) surging

3.99%.