By Kevin Buckland

TOKYO, May 29 (Reuters) - Japan's Nikkei share average rose toward a record on Friday, powered by renewed optimism for a near-term peace deal in the Middle East and enthusiasm about AI shares after strong earnings from Dell Technologies.

The Nikkei .N225 climbed as much as 2.1% in early trading to reach 66,041.83, putting it not far from Wednesday's all-time peak of 66,428.81.

The broader Topix .TOPX advanced as much as 1.5% to touch 3,961.31, approaching Wednesday's lifetime high of 3,971.77.

Sources told Reuters that the U.S. and Iran have reached an agreement to extend their ceasefire and lift restrictions on shipping, though U.S. President Donald Trump has yet to approve it, and Iranian state media said it had not been finalised.

Conflicting headlines in recent days around progress in negotiations between Washington and Tehran have seen stocks swing, but for the week, the Nikkei and Topix were on track for gains of 4.1% and 1.5%, respectively.

The Nikkei has outperformed largely due to its high concentration of tech stocks, and heavy weighting for some darlings of the AI trade, such as startup investor SoftBank Group, which soared 5.9% on Friday.

On Thursday, Dell DELL.N raised its annual revenue and profit forecasts, showing data center expansion by clients is fueling demand for its AI-optimized servers.

"Dell Technologies commented that there is no sign of a slowdown in AI demand," driving a sharp rise in Japanese AI stocks such as SoftBank, said Wataru Akiyama, a strategist at Nomura Securities.

Meanwhile, "announcements from both the U.S. and Iran suggesting progress toward a provisional agreement have provided a sense of reassurance to the market," buoying stocks more broadly, he said.

Of the Nikkei's 225 components, 173 rose versus 50 that fell, with two trading flat.

Silicon maker Sumco 3436.T soared more than 18%, making it the index's biggest percentage gainer.

However, not all AI shares got a lift from Dell, with data center cable makers Fujikura 5803.T and Furukawa Electric 5801.T dropping 6.2% and 4.6%, respectively, to be among the Nikkei's worst performers.