Nikkei tracks Wall Street higher; tech earnings, Fed in focus

Updates for midday market break

By Brigid Riley

TOKYO, Jan 29 (Reuters) - Japan's Nikkei share average rose on Wednesday after Wall Street rebounded overnight from a sell-off triggered by Chinese startup DeepSeek's launch of AI models, although investors remained wary of the outlook for technology sector ahead of mega-cap earnings.

The Nikkei .N225 was up 0.6% at 39,232.75, as of the midday break, after rising 1% in early trade. The broader Topix .TOPX gained 0.6% to 2,773.97.

U.S. stocks ended higher on Tuesday, with Nvidia NVDA.O and other artificial intelligence-linked technology shares recovering from sharp losses the previous day as investors snapped up bargains..N

Japan's semiconductor- and AI-related shares started the day on a strong note before gains narrowed. Analysts said U.S. and Japan shares had yet to completely recover as investors remained on edge.

"There's a strong sense that investors are taking a wait-and-see approach... The Nasdaq rose (overnight), but it doesn't feel like you can let your guard down just yet," said Hiroshi Namioka, chief strategist at T&D Asset Management.

Market focus is now on the earnings reports of big U.S. tech companies, with more than half of the Magnificent 7 reporting this week.

U.S. tech firms' capital investment strategies will likely be under scrutiny after DeepSeek said it was able to develop its AI model for a fraction of the cost, said Namioka.

Markets were also awaiting the U.S. Federal Reserve's monetary policy decision due later on Wednesday. The Fed is widely expected to hold interest rates steady, putting attention on any hints on whether a rate cut could happen soon.

Japanese chip-testing equipment maker Advantest 6857.T, which counts Nvidia among its customers, was up 0.3%, while peer Tokyo Electron 8035.T slipped into negative territory. AI-focused startup investor SoftBank Group 9984.T was nearly flat.

Fujikura 5803.T, which manufactures materials for data centres, slid 1.5%.

Among other individual shares, entertainment conglomerate Sony Group Corp 6758.T jumped 4.7% to become the top percentage gainer on the Nikkei, ahead of Trend Micro 4704.T, up 4%, and Mitsubishi Heavy Industries 7011.T, up 3.2%.