(Recasts, adds fresh analyst comment)

* Nikkei last down 1.79% to 61,251.18 while the Topix lost

0.65%

* Screen Holdings ( DINRF ) plunged more than 19%, its biggest

percentage drop since January 2020

* Investors awaited Microsoft ( MSFT ) earnings on Wednesday and

Amazon ( AMZN ) results on Thursday

By Satoshi Sugiyama

TOKYO, July 29 (Reuters) - Japan's Nikkei share average

plunged to a fresh two-month low on Wednesday, as investors sold

off chip-linked shares ahead of major U.S. tech earnings, while

renewed fighting in the Middle East dampened risk appetite.

Asian chipmakers have been highly volatile recently, as

doubts over returns from AI companies' heavy spending emerge

amid intensifying Chinese competition.

The tech-heavy Nikkei was last down 1.79% to

61,251.18, after falling as much as 3.087% and extending the

previous session's more-than 4% fall. The broader Topix

lost 0.18% to 3,957.29.

"There was no fresh event that soured sentiment; the market

is simply extending its recent trend," said Shingo Ide, chief

equity strategist at the NLI Research Institute.

Semiconductor equipment maker Screen Holdings ( DINRF )

plunged more than 19%, its biggest percentage drop since January

2020. Memory chipmaker Kioxia ( KXHCF ) slumped as much as 15.11%

while Tokyo Electron ( TOELF ) shed 12.07%.

The Nikkei has closely tracked moves in South Korea's

tech-heavy benchmark KOSPI and the U.S. Philadelphia

semiconductor index.

The KOSPI plunged more than 11% on the day after chipmaker

SK Hynix's ( SKHY ) bumper quarterly results fell short of

lofty investor expectations. The U.S. chip index fell almost

4.5% overnight on Tuesday.

"Japanese stocks may not have fully completed their

correction, but they had fallen to levels where the adjustment

could have run its course. For markets such as the KOSPI, the

correction may still have further to go," Ide said.

U.S. tech heavyweights Microsoft ( MSFT ) and Amazon ( AMZN )

are due to report their earnings this week.

In Japan, chip-testing equipment maker Advantest ( ADTTF ) is

scheduled to announce results on Wednesday.

Oil prices rose more than $3 a barrel after U.S. and Saudi

Arabia attacked Iran-linked forces in Iraq.

In other stocks, Keyence ( KYCCF ) surged as much as 15.42%,

among Nikkei's biggest percentage gainers, after the factory

automation sensors and systems provider reported robust

earnings.

Video game company Konami ( KNAMF ) gained 9.91% and

cosmetics firm Shiseido ( SSDOF ) rose 7.35%.

There were 131 gainers against 94 decliners on the Nikkei.