(Updates for midday market break)

By Brigid Riley

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

rose on Wednesday after Wall Street rebounded overnight from a

sell-off triggered by Chinese startup DeepSeek's launch of AI

models, although investors remained wary of the outlook for

technology sector ahead of mega-cap earnings.

The Nikkei was up 0.6% at 39,232.75, as of the

midday break, after rising 1% in early trade. The broader Topix

gained 0.6% to 2,773.97.

U.S. stocks ended higher on Tuesday, with Nvidia ( NVDA )

and other artificial intelligence-linked technology shares

recovering from sharp losses the previous day as investors

snapped up bargains.

Japan's semiconductor- and AI-related shares started the day

on a strong note before gains narrowed. Analysts said U.S. and

Japan shares had yet to completely recover as investors remained

on edge.

"There's a strong sense that investors are taking a

wait-and-see approach... The Nasdaq rose (overnight), but it

doesn't feel like you can let your guard down just yet," said

Hiroshi Namioka, chief strategist at T&D Asset Management.

Market focus is now on the earnings reports of big U.S. tech

companies, with more than half of the Magnificent 7 reporting

this week.

U.S. tech firms' capital investment strategies will likely

be under scrutiny after DeepSeek said it was able to develop its

AI model for a fraction of the cost, said Namioka.

Markets were also awaiting the U.S. Federal Reserve's

monetary policy decision due later on Wednesday. The Fed is

widely expected to hold interest rates steady, putting attention

on any hints on whether a rate cut could happen soon.

Japanese chip-testing equipment maker Advantest ( ADTTF ),

which counts Nvidia ( NVDA ) among its customers, was up 0.3%, while

peer Tokyo Electron ( TOELF ) slipped into negative territory.

AI-focused startup investor SoftBank Group was nearly

flat.

Fujikura ( FKURF ), which manufactures materials for data

centres, slid 1.5%.

Among other individual shares, entertainment conglomerate

Sony Group Corp ( SONY ) jumped 4.7% to become the top

percentage gainer on the Nikkei, ahead of Trend Micro ( TMICF ),

up 4%, and Mitsubishi Heavy Industries ( MHVYF ), up 3.2%.

(Reporting by Brigid Riley; Editing by Subhranshu Sahu)