(Updates with closinig prices)

By Junko Fujita

TOKYO, Aug 5 (Reuters) - Japan's Nikkei share average rose

more than 3% to close at a two-week high on Wednesday as

AI-related stocks jumped to track their U.S. peers, and

investors scooped up stocks with a strong outlook.

The Nikkei rose 3.66% to 66,300.44, its highest

close since July 23, while the broader Topix climbed

2.13% to 4,046.17.

The S&P 500 and the Dow closed at record highs on Tuesday,

powered by the latest batch of earnings from AI-related

companies such as Caterpillar and Palantir that assuaged demand

concerns, while crude prices and Treasury yields dropped on

hopes for a deal in the Iran war.

Chip-testing equipment maker Advantest ( ADTTF ) and

chip-making equipment maker Tokyo Electron ( TOELF ) rose 8.77%

and 3,26%, respectively, tracking the Philadelphia Semiconductor

index's 6.6% gain overnight.

The U.S. chip index rose for a fourth straight session after

tumbling 20.6% in July.

Murata Manufacturing ( MRAAF ), a leading maker of multi-layer

ceramic capacitors (MLCCs) used to regulate power in AI servers,

jumped 9.82% after raising its annual net profit forecast.

"Compared with the past, more companies raised their annual

outlook in the first quarter, which means they had made modest

forecasts due to the impact of the Middle East war," said

Daisuke Hashizume, a senior strategist at Daiwa Securities

"A series of upward revisions of forecasts of Japanese firms

is a positive factor for overall equities," he said.

Fanuc ( FANUF ) rose 4.41% after the robot maker raised its

annual net profit forecast.

Bank shares rose, with Mitsubishi UFJ Financial Group ( MUFG )

and Mizuho Financial Group ( MFG ) up 2.05% and 4.17%,

respectively.

Bucking the trend, Uniqlo-brand owner Fast Retailing ( FRCOF )

fell 2.33%, and air-conditioning maker Daikin Industries ( DKILF )

fell 6.31%, weighing the most on the Nikkei.

Of more than 1,500 stocks trading on the Tokyo Stock Exchange's

prime market, 65% rose, 31% fell and 3% traded flat.