South Korea’s government has proposed nearly doubling its artificial intelligence spending next year, allocating 21.3 trillion won ($15.5 billion) to AI initiatives in the 2027 budget. The proposal compares with 10.8 trillion won ($7.8 billion) allocated in 2026, representing a 97.2% increase in a single budget cycle.

The plan is part of President Lee Jae-myung’s effort to strengthen South Korea’s position in the rapidly expanding global AI sector, with semiconductors, robotics, data centers and sovereign AI models — AI systems built and controlled domestically — at the center of the strategy.

How the proposed AI budget would be allocated

The spending plan is organized around semiconductors, physical AI and the development of domestic AI data centers. Physical AI refers to systems that operate in the real world through machines such as robots, rather than operating solely as software or chatbot applications.

The proposed allocations include:

• Semiconductors: 3.4 trillion won
• Physical AI, including robotics: 3.1 trillion won
• AI data-center ecosystem support: 500 billion won
• Infrastructure development: 2.1 trillion won
• Frontier AI models and the “AI for All” initiative: 12.2 trillion won

The largest share of the proposed AI budget, the 12.2 trillion won earmarked for frontier AI models and “AI for All,” accounts for more than half of the total.

Hardware represents one of the largest individual components of the plan. The government has earmarked 4.7 trillion won to purchase 10,000 next-generation graphics processing units (GPUs) — the specialized processors used to train and run large AI models — for sovereign AI models.

The proposal also includes 250 billion won to establish a free public AI service.

AI spending rises faster than the overall budget

The AI allocation is part of a much larger proposed national budget totaling between 820.9 trillion and 821 trillion won. That figure represents a 12.8% increase from the previous year, compared with the 97.2% increase proposed for AI spending — meaning AI funding would grow at more than seven times the pace of the overall budget.

South Korea’s Cabinet approved the budget proposal on September 1, 2026. The plan has since been submitted to the National Assembly, where lawmakers will deliberate on its provisions before the budget takes effect. The final figures could change during that process.

Beyond chips and AI models, the budget includes measures to expand infrastructure, attract and develop talent, and improve public services under the “AI for All” initiative. The government has also presented the strategy as a way to support regional development and reinforce South Korea’s role in the international supply chain.

Private-sector investment exceeds public funding

The government’s spending plan comes alongside substantially larger commitments from Korean industry. Major companies in the country have committed more than 800 trillion won in new investment for semiconductor fabrication and 550 trillion won for AI data-center construction.

Against those commitments, the 21.3 trillion won public allocation positions the state as a catalyst for private investment rather than the sole source of financing. Government support is intended to help reduce infrastructure risks and secure strategic capacity as companies expand their operations.

The planned purchase of 10,000 next-generation GPUs and the funding for data-center construction are expected to generate demand for hardware, power infrastructure and related services. Samsung and SK Hynix, two of South Korea’s most prominent semiconductor companies and leading global memory-chip makers, are among the industry participants positioned within that supply chain.

The large allocation for sovereign AI models also reflects the government’s objective of developing domestic capabilities across the full technology stack, including chips, data centers and AI models, rather than relying exclusively on systems developed abroad.

The funding for physical AI and robotics is another major element of the strategy. South Korea has an established manufacturing base, and the government is connecting that industrial capacity with the development of AI-powered machines.

The National Assembly’s review is the next stage for the proposal. Lawmakers will debate the plan, and its allocations may be revised before the 2027 budget is finalized. The 4.7 trillion won GPU purchase and the 12.2 trillion won allocation for frontier AI models and the “AI for All” initiative are among the items whose final size will be decided during that process.

Source: CryptoBriefing