South Korea bets $14B on AI as trillion-dollar race accelerates

According to the finance ministry of South Korea, it will set up a sovereign wealth fund worth more than 20 trillion won ($14 billion) on Friday to invest in strategic and advanced industries. It gives South Korea some new financial leverage at a time when various investments in AI infrastructure are on the verge of reaching 1 trillion dollars worldwide.

The timing is important. South Korea has both SK Hynix and Samsung, whose high-bandwidth memory (HBM) chips power many of the world’s AI accelerators. Nvidia CEO Jensen Huang recently mentioned a possible partnership with SK Group valued at about $500 billion during a meeting held in San Francisco with President Lee Jae Myung, according to an earlier report by Cryptopolitan.

Though the country excels in AI hardware production, it has relatively little AI computing capacity overall. The new fund aims to address that.

AI memory supplier with little compute of its own

South Korea is ahead in the production of memory chips used in AI. However, domestically it lags in AI computing infrastructure, which has led the government to invest directly in advancing this field.

The growing inequality cannot be brushed aside any longer. The Carnegie Endowment for International Peace released a report in June stating that, in addition to Australia and Italy, South Korea has no significant publicly available operational clusters for AI chips. In contrast, nearly 75% of all high-tech AI computing clusters are located in the US as of mid-2025.

The same report showed that U.S. tech companies alone are expected to invest nearly $670 billion this year—approximately 2% of U.S. GDP—into AI computing facilities. Investments in data centers globally will be approaching $1 trillion, which indicates the rapid competition among various nations for AI capacity.

South Korea is already a critical supplier of AI hardware. Thus, expanding its domestic computing resources is the next logical step.

Who pays into the fund, and on what terms

The sovereign wealth fund will combine government assets and capital from state-backed lenders, with investments beginning after lawmakers approve the enabling legislation.

The fund will operate through a new account managed by the state-run Korea Investment Corporation (KIC), allowing the government to tap into the organization’s global investment expertise.

Financial institutions supported by the government, such as the Korea Development Bank, Export-Import Bank of Korea, and Industrial Bank of Korea, will be providing 16 trillion won. The balance of about 4 trillion won will be raised through the stocks acquired by the government by way of inheritance as well as gift tax payments.

According to officials, the fund will not have a maturity date and will operate on three basic principles: making profits, being stable, and promoting public interests. Profits earned from the investments will either be reinvested, paid out as dividends to the government, or go into the national treasury.

The finance ministry wants the National Assembly’s approval before the end of the year, which will allow the new fund to start working in 2027.

The demand curve Seoul is chasing

South Korea is ramping up public expenditure as the global race for computing power heats up and investments in artificial intelligence increase.

This initiative of the government coincides with the ongoing rise in investment in artificial intelligence in Asia and elsewhere.

Recent research from IDC suggests that expenditure on AI and generative AI in the Asia-Pacific region will increase from $73 billion in 2024 to $370 billion in 2029, thus realizing a compound annual growth rate (CAGR) of 38.4%. It is projected that generative AI alone will account for about $175 billion of the said figure.

Meanwhile, the research firm Omdia estimates the global investment in data centers at nearly $1.6 trillion by 2030, while technology companies are expected to spend about $600 billion on AI infrastructure in 2026 alone, according to a previous report by Cryptopolitan covering Nvidia-SK negotiations.

South Korea has embraced artificial intelligence as a major catalyst for the next phase of its economic development. The finance ministry has laid out a plan in its economic strategy for the second half of 2026 concerning the pursuit of a “hyper-innovation economy” through increased adoption of AI. The country is hoping to attain a growth target of 3% as it aims to become one of the top four exporters in the world.

What happens next

Only after the enabling legislation is passed by the National Assembly of South Korea can the fund begin making investments. The fund is expected to begin operations in 2027.

The proposal then goes to the National Assembly, where the lawmakers will finalize the structure and investment mandate of the fund.

Those decisions will determine whether the newly acquired capital is devoted mainly to AI computing infrastructure and data centers or invested in other strategic industries. If the law gets adopted in time, the fund is likely to be established in 2027 as one of the main platforms for South Korea’s long-term investments in AI infrastructure.

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