(Adds analyst comment in paragraph 4, updates with closing

prices)

By Junko Fujita

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

reversed course to end higher on Monday, as chip-related stocks

cut losses after South Korea rolled out sweeping chip and AI

mega-projects.

The Nikkei closed 0.15% higher at 69,468.11, after

falling as much as 1.97% earlier in the session. The broader

Topix rose 0.47% to 3,982.

South Korean President Lee Jae Myung said the world's two

largest memory chipmakers, Samsung Electronics ( SSNLF ) and

SK Hynix, would invest some $520 billion with

suppliers to build two new chip fabrication sites in the

country.

"What pushed the Nikkei lower were chip-related shares, and

what made the Nikkei reverse the loss were also chip-related

shares," said Kazuaki Shimada, chief strategist at IwaiCosmo

Securities.

Memory chipmaker Kioxia ( KXHCF ) narrowed its early loss,

ending 4.5% lower. Chip-testing equipment maker Advantest ( ADTTF )

fell 1.51%. Chip-making equipment maker Tokyo Electron ( TOELF )

rose 2.44%.

Those shares declined in early trade after the Philadelphia

SE semiconductor index's 5.3% fall on Friday. The decline

underscores recent volatility among AI-related chipmakers that

have fuelled much of Wall Street's gains in recent years.

On Monday, investors rotated out of AI-related stocks to

beaten-down shares, said Shuutarou Yasuda, a market analyst at

Tokai Tokyo Intelligence Laboratory.

"There was a concern in the market that memory chip prices

have risen too much," he said.

Game maker Nintendo ( NTDOF ), whose profits have been

squeezed by rising memory chip prices, jumped 5.25%, while Sony

Group ( SONY ) rose 3.13%.

The fragility of the U.S.-Iran interim peace deal has not

become a market-moving cue in Japan, said Yasuda.

Energy-related shares, which typically react positively to

war tensions, fell on Monday.

The mining sector lost 1.83% and oil refiners

fell 1.07%.

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

Exchange's prime market, 69% rose, 26% fell and 2% traded flat.