(Updates with closing prices)

By Kevin Buckland

TOKYO, Aug 6 (Reuters) - Japan's Nikkei share average

declined on Thursday, as heavyweight tech stocks tracked losses

among Wall Street peers, outweighing gains in most equities amid

lower crude prices on rising hopes of a Middle East peace deal.

The tech-heavy Nikkei fell just over 2% at one point

before ending the day down 0.9% at 65,683.26.

Of its 225 components, 56 dropped, 168 rose and one finished

flat. Technology was the only sector to decline.

Heavily weighted AI-related plays tumbled after the

overnight slide in U.S.-listed chipmaker AMD and SpaceX

as concerns about massive AI spending flared again.

AI-focused startup investor SoftBank Group dropped

4.4%, chip-making equipment maker Tokyo Electron ( TOELF )

skidded 5.5% and chip-testing tool manufacturer Advantest ( ADTTF )

slipped 2.3%.

By comparison, the broader Topix shed a relatively

small 0.2%.

"Because these semiconductor-related stocks have a high

impact on the index, the selloff looks harsh at first glance but

overall market sentiment hasn't deteriorated drastically," said

Wataru Akiyama, an equities strategist at Nomura Securities,

adding that the broader market was buoyed by the decline in oil.

The Topix textiles and apparel sub-index jumped

5.35% to be the best performer among the Tokyo Stock Exchange's

33 industry groupings.

On the Nikkei, standouts included healthcare equipment maker

OMRON, with a 15% rally, cosmetics company Kao

, which climbed nearly 13%, and online marketplace

Mercari ( MRCIF ), which advanced nearly 12%.

(Reporting by Kevin Buckland; Editing by Harikrishnan Nair and

Mrigank Dhaniwala)