Japan's Nikkei extends fall on Fed rate-hike, tech valuation concerns

By Rocky Swift

TOKYO, June 24 (Reuters) - Japan's Nikkei share gauge fell for a second day on Wednesday, as concerns over potential interest rate hikes by the Federal Reserve and valuations in the AI sector weighed on sentiment.

The benchmark Nikkei 225 slid 0.56% to 69,396.61, retreating further from a record high reached on Monday. The broader Topix slipped 0.31% to 3,977.91.

The decline followed overnight losses in U.S. equities, where the Philadelphia Semiconductor Index sank 7.9% amid worries about debt-funded AI spending and tighter financial conditions.

"Speculation that the Federal Reserve is moving toward interest rate hikes has heightened concerns about rising financing costs for AI capital expenditures, which appears to have accelerated the decline in semiconductor stocks," Sony Financial Group analysts said in a note.

There were 113 advancers on the Nikkei 225 against 111 decliners and one unchanged.

Chip-related shares were among the laggards, with Tokyo Electron (TOELF) dropping 3.6% and Disco losing 4.3%.

Insurance stocks also fell sharply, led by T&D Holdings (TDHOF) , which slid 3.7%. On the upside, retail shares gained, with J. Front Retailing (JFROF) surging 6.3%. (Reporting by Rocky Swift in Tokyo; Editing by Subhranshu Sahu)