(Updates with closing prices)

By Kevin Buckland

TOKYO, Oct 3 (Reuters) - Japan's Nikkei share average

rallied to an all-time closing high on Friday as euphoria around

artificial intelligence gripped the market, sending chip stocks

surging.

The tech-heavy Nikkei ended the day up 1.9% at

45,769.50, topping the record set on Thursday of last week by

about 15 points.

The broader Topix advanced 1.4%.

The gains came despite the event risk on the weekend, with

the ruling Liberal Democratic Party set to elect a new leader on

Saturday, who would ostensibly take over as prime minister.

Frontrunner Shinjiro Koizumi is seen as a continuity

candidate, while rival Sanae Takaichi is viewed as a fiscal and

monetary dove.

"If Takaichi wins, Monday could see stocks higher, bond

yields higher, and a weaker yen," said Nomura strategist Maki

Sawada. "But whoever wins, there is likely to be some degree of

fiscal loosening."

Hitachi ( HTHIF ) vaulted 10.3% to be the Nikkei's

best-performing stock on Friday, buoyed by a local media report

about a partnership with ChatGPT maker OpenAI, which is now

worth $500 billion.

The three biggest gainers in index-point terms were

chip-testing equipment maker and Nvidia supplier Advantest ( ADTTF )

, AI-focused investor and OpenAI backer SoftBank Group

, and chip-making tool manufacturer Tokyo Electron ( TOELF )

, up 4.3%, 3.6% and 2.3%, respectively.

Overnight, U.S. tech shares had also pushed Wall Street to

new record highs.

Of the Nikkei's 225 components, 181 rose, 43 fell and one

traded flat.

Japanese shares got additional support from a weaker yen,

which raises the value of overseas revenues at Japan's many

heavyweight exporters. The yen declined for a second day versus

the U.S. dollar on Friday, following a four-session, 1.9% surge.