Japan’s benchmark Nikkei share average surpassed the 68,000 mark for the first time on Wednesday, extending its record-setting rally as strong gains in artificial intelligence and semiconductor-related stocks outweighed investor concerns over rising tensions in the Middle East, Reuters reported.

The Nikkei rose 2.2% to 68,203.79 in morning trade, two days after breaching the 67,000 level. The broader Topix index also rose 1.5% to 3,982.89.

According to Reuters, investor sentiment was boosted by continued strength in technology shares following positive signals from Wall Street and optimism surrounding demand for AI-related products and services.

Memory chip maker Kioxia Holdings surged 7.2% to surpass the 80,000-yen threshold for the first time after announcing plans to start paying dividends from fiscal 2027, supported by a strong earnings performance. According to one report, the rally briefly pushed Kioxia ahead of Toyota Motor as Japan’s second most valuable listed company.

Semiconductor-related stocks were the biggest contributors to the market’s gains. Tokyo Electron rose 10.3%, while semiconductor testing equipment maker Advantest rose 4.1%. Together, the two companies added about 840 points to the Nikkei index.

Analysts attributed the rally to continued enthusiasm for AI-linked companies and expectations of strong demand in the semiconductor supply chain, Reuters reported.

25 of the Tokyo Stock Exchange’s 33 industry sectors rose. Nonferrous metals led the way with a 6.3% jump, while pharmaceuticals were the weakest performing sector, falling 2.2%.

Oil prices rose more than 1% after geopolitical tensions in the Middle East intensified. Iran launched missiles at Kuwait and Bahrain, while diplomatic efforts with the United States showed limited progress, raising concerns about regional stability and energy supplies.

Within the Nikkei, semiconductor equipment maker Screen Holdings emerged as the top performer, up 13.9%, followed by cable and optical fiber maker Fujikura, which gained 11.1%.

On the downside, software testing company SHIFT fell 9.2%, making it the biggest decliner in the benchmark index. Heavy machinery maker IHI also retreated 5.5%.