South Korea targets sovereign AI, semiconductors in record $610 billion budget

South Korea presented the largest budget in its history for 2027, of 820.9 trillion won (US$610.14 billion), an increase of 12.8%. According to CNBC, President Lee Jae Myung announced the project at the National Assembly with a clear priority for technology, especially semiconductors and artificial intelligence.

The biggest chunk goes to semiconductors, physical AI and AI data centers: 21.3 trillion won, almost double the 2026 level, according to the report. In parallel, 4.7 trillion won will be allocated to a sovereign AI model, and the goal, according to CNBC, is for it to achieve the 'highest performance in the world'. The plan also calls for training 2,000 experts in semiconductor design.

The report also describes the so-called 'contract departments' at universities, courses linked to companies such as Samsung Electronics and SK Hynix. In this model, companies help design classes, offer financial support and recruit graduates, which brings workforce training closer to industrial demand.

The backdrop helps support the expansion of spending. According to the IMF, South Korean GDP is expected to grow 3.3% in 2026, the fastest pace since 2021. Defense is also gaining ground, rising 8.2%, to 73.3 trillion won.

The point that most interests those who defend fiscal responsibility is the government's argument. According to CNBC, Lee stated that the greater spending does not increase net public debt, as the new bonds will be used to pay off existing debt. The thesis depends on the account closing in this way, and the execution of the budget will be the practical test.

In foreign trade, the numbers are significant. Exports in October totaled US$115.3 billion, a record with an increase of 93.7% year on year, according to data from the Customs Service released on Sunday. From January to October, sales reached US$930 billion, the first time above US$900 billion. The trade surplus for the month was US$42.5 billion, even with imports 36% higher, to US$72.8 billion. Lee said the country is close to $1 trillion in annual exports, with semiconductors as the highlight.

What changes for the investor

For those who follow the stock market, Nasdaq, interest rates and the dollar, the message is of a public spending cycle focused on semiconductors and AI, a sector that usually reacts strongly to this type of signal. The report, however, does not provide data on the market reaction, and therefore nothing here indicates the direction of prices. It is worth monitoring the execution of the budget, the evolution of semiconductor exports and the trajectory of net public debt, indicators that show more about fiscal risk than an announcement of intentions.

Automatically translated from Portuguese.