Japan's Nikkei falls on Fed rate-hike bets, tech valuation concerns

(Updates with closing levels.)

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 AI sector valuations weighed on sentiment.

The benchmark Nikkei 225 slid 0.88% to close at 69,174.97, retreating further from a record high reached on Monday. The broader Topix slipped 0.67% to 3,963.76. 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 91 advancers on the Nikkei, 131 decliners, and three unchanged. Chip-related shares were among the laggards, with Tokyo Electron (TOELF) dropping 4.19% and Disco losing 3.78%.

Insurance stocks also fell sharply, led by T&D Holdings (TDHOF) , which slid 5.74%. On the upside, retail shares were largely higher, with J. Front Retailing (JFROF) surging 3.99%. (Reporting by Rocky Swift in Tokyo; Editing by Subhranshu Sahu and Rashmi Aich)