Japan's Nikkei index surged over 3% on Wednesday to close at its highest level in two weeks, as artificial intelligence-related stocks tracked gains in their US counterparts and investors snapped up shares of companies with strong prospects.

The Nikkei rose 3.66% to finish at 66,300.44 points, marking its best closing level since July 23, while the broader Topix index climbed 2.13% to end at 4,046.17 points.

The rally was supported by solid earnings from AI-linked companies like Caterpillar and Palantir, which eased demand concerns, driving the S&P 500 and Dow Jones to new all-time highs on Tuesday. Meanwhile, oil prices and US Treasury yields fell on hopes of a potential deal to end the war in Iran.

Chip-testing equipment maker Advantest surged 8.77%, and chip-making equipment manufacturer Tokyo Electron gained 3.26%, tracking the Philadelphia Semiconductor Index's 6.6% overnight jump. The US chip index has risen for four consecutive sessions after plunging 20.6% in July.

Murata Manufacturing, a leading producer of multilayer ceramic capacitors used for power conditioning in AI servers, soared 9.82% after raising its annual net profit forecast.

Daiwa Securities senior strategist noted, "More companies revised up their annual outlooks in the first quarter compared to the past, meaning they had made conservative forecasts due to the impact of the Middle East conflict. This series of upward revisions by Japanese firms is a positive factor for the overall stock market."

Robot maker Fanuc rose 4.41% after hiking its annual net profit forecast. Banking stocks also advanced, with Mitsubishi UFJ Financial Group up 2.05% and Mizuho Financial Group gaining 4.17%.

On the downside, Fast Retailing, the parent company of Uniqlo, fell 2.33%, while air conditioner maker Daikin Industries dropped 6.31%, exerting the most drag on the Nikkei.

Among the 1,500-plus stocks traded on the Tokyo Stock Exchange's main board, 65% advanced, 31% declined, and 3% were flat.