CORRECTED-Nikkei snaps three-day decline; tech earnings, Fed in focus

Corrects closing levels of Nikkei and Topix in the second paragraph

By Brigid Riley

TOKYO, Jan 29 (Reuters) - Japan's Nikkei snapped a three-day losing run on Wednesday, tracking Wall Street's recovery from a sell-off triggered by Chinese startup DeepSeek's AI model launch, with the focus now on major U.S. earnings and the Federal Reserve's rate decision.

The Nikkei .N225 closed 1% higher at 39,414.78. The broader Topix .TOPX gained 0.7% to finish at 2,775.59.

U.S. stocks ended higher on Tuesday, with Nvidia NVDA.O and other AI-linked tech shares bouncing back from sharp losses the previous day. .N

Japan's tech shares seesawed on the day as investors remained on edge but ended on a strong note. Chip-testing equipment maker Advantest 6857.T, which counts Nvidia among its customers, rallied 4.4%, giving the Nikkei the largest lift.

The focus now turns to 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 Hiroshi Namioka, chief strategist at T&D Asset Management.

"The Nasdaq rose (overnight), but it doesn't feel like you can let your guard down just yet," he said.

Markets also await the Fed's monetary policy decision later on Wednesday. The Fed is widely expected to hold interest rates steady, but the focus will be on its commentary for clues on the timing of the next rate cut.

Tokyo Electron 8035.T and AI-focused startup investor SoftBank Group 9984.T both added a little over 2%. Chipmaker Renesas Electronics 6723.T jumped 5.9%, the most on the Nikkei.

Uniqlo parent Fast Retailing 9983.T climbed 1.3%, while entertainment conglomerate Sony Group 6758.T rose 3.8%.

Shin-Etsu Chemical 4063.T lost 4.3% after the silicon wafer maker kept its earnings forecast for the fiscal year ending March 2025 unchanged.