Is this right or wrong?

While Wall Street spent recent weeks debating whether the AI trade had run its course, South Korea’s president walked into parliament on Monday and committed 21.3 trillion won, about $15.97 billion, to AI and the government’s three mega-projects for 2027. President Lee Jae Myung told lawmakers the figure was nearly double this year’s amount. That is not a marginal adjustment. It is a country placing a sovereign bet on the same cycle that Nvidia shareholders have been riding since 2023, at a fraction of the valuation.

What the Budget Actually Funds

The headline spending is tied to AI and three mega-projects: semiconductors, physical AI, and AI data centres, with data-centre buildouts explicitly part of the plan. On top of that, the government has said it will invest 4.7 trillion won to support frontier AI development projects, with the stated aim of achieving world-leading performance for a national AI model. Defence AI is also in scope.

The overall 2027 budget proposal totals 820.9 trillion won, a 12.8% increase year-on-year, making it the largest budget proposal on record. Embedded within it is a 162.3 trillion won Future Response Fund. Government and local media reporting around the proposal has described the fund as being financed largely by additional tax revenue tied to the semiconductor upswing, earmarked to support growth industries, young people, regional development, and education. But it is a mistake to treat that revenue stream as permanent. Even in Korean official and budget-office discussions, the point has been that the windfall may fade later in the decade, which is why the fund is framed as a strategic buffer rather than a forever line item.

The Economy Behind the Headlines

South Korea’s economy grew more than three times faster than expected in the third quarter, driven by booming semiconductor demand, with GDP expanding 1.0% quarter-on-quarter in July-September. The reading was boosted by a 2.3% rise in exports led by semiconductors, machinery, and electrical equipment, while investment in facilities jumped 4.1%, driven mainly by machinery used in chip-making. From January to October, exports totalled $930 billion, putting South Korea on track to exceed $1 trillion in annual exports this year and become the fourth country to reach that milestone, after the United States, China, and Germany.

The real question for investors is why Korean equities have not already reflected this. GDP rose 1.0% in Q3 2026 versus forecasts clustered far lower, yet the KOSPI still struggled through the summer as global AI enthusiasm cooled. The divergence is not accidental. Korean equities carry a structural discount rooted in long-running concerns about corporate governance, cross-shareholding, and capital-allocation practices. Despite its critical role in high-bandwidth memory, SK Hynix has often traded at a discount to global peers, according to Seoul-based semiconductor analysts.

The Investment Case for Korean Shares

Monday’s budget push changes one part of that discount equation. Sovereign capital flowing into chip production infrastructure, data centres, and frontier AI does not merely subsidise Samsung and SK Hynix; it reduces the execution risk that investors price in when governments sit on the sidelines. Lee needs parliament to pass the budget, and his party’s majority makes approval more likely than not.

Samsung and SK Hynix advanced as Korea reported another export surge for October, with semiconductor exports up about 259.4% year-on-year and overall exports up 93.7% year-on-year. Samsung Electronics rose 1.78% and SK Hynix advanced 3.81% at the close. Both remain the primary beneficiaries of any data centre construction funded under the mega-project umbrella, as central suppliers of the memory chips, including high-bandwidth memory, that AI accelerators require.

Investors who want broad Korean exposure without picking individual names can access the market through funds tracking the KOSPI. The iShares MSCI South Korea ETF provides that avenue without concentrating on a single company. For those comfortable with individual names, Samsung and SK Hynix remain the anchors of Korea’s equity market and the core public-market expression of the AI memory cycle.

Risks to Monitor

Financial analysts and the National Assembly Budget Office have flagged concerns about the budget’s durability, warning that the additional tax revenue meant to fund the Future Response Fund may be temporary and could fade after the late 2020s. Export restrictions involving US-China trade policy remain the sharpest near-term risk for HBM demand. And the KOSPI’s summer downdraft, when the index fell sharply as global AI enthusiasm cooled, showed how quickly sentiment can reverse in a market this concentrated.

Sentiment risk is real and has already shown its teeth. The Philadelphia Semiconductor Index crossed into bear market territory in weeks, erasing gains across the entire chip sector.

The Wealth Builder Takeaway

The most durable lesson here is about who benefits when governments fund the same infrastructure private capital is already building. South Korea is not chasing AI; it is financing the physical layer beneath it: the fabs, the data centres, the memory chips. Samsung and SK Hynix sit at that layer. The KOSPI’s discount to its own underlying earnings is a feature the government just started working against. That combination, sovereign backing plus structural undervaluation plus proven export momentum, deserves a place in the conversation about where to own AI exposure next year.