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Government allocates 10.1 trillion won for AI in budget

Published: 29 Aug. 2025, 16:54 Updated: 29 Aug. 2025, 17:28

Deputy Prime Minister and Finance Minister Koo Yun-cheol, far left, speaks during a meeting on next year's budget at the National Assembly in Yeouido, western Seoul on Aug. 26. [KIM SEONG-RYONG]

The Korean government will invest 10.1 trillion won ($7.26 billion) in AI as part of its 2026 budget plan, including the purchase of 15,000 high-performance GPUs. Another 1 trillion won will be funneled into the National Growth Fund, a public-private initiative expected to exceed 100 trillion won in scale.

The Cabinet finalized the 2026 budget plan at a meeting Friday, highlighting what it described as a “technology-driven super innovation economy.”

The government said it will prioritize fiscal spending on AI and other future growth engines to reinvigorate Korea’s slowing economy, which has been weakened by low birth rates and an aging population. A total of 72 trillion won has been earmarked for research and development (R&D).

“Most of the increased resources will be allocated intensively to R&D, AI and leading projects for a super innovation economy to strengthen the country’s future growth potential,” said Deputy Prime Minister and Finance Minister Koo Yun-cheol.

Deputy Prime Minister and Finance Minister Koo Yun-cheol speaks during a press conference on next year's budget at the government complex in Sejong on Aug. 28. [NEWS1]

AI spending triples

The AI budget, set at 10.1 trillion won, is more than triple this year's 3.3 trillion won. The government plans to purchase 15,000 GPUs to expand computing infrastructure, in addition to the 10,000 units already secured through a supplementary budget this year and existing holdings. Within two years, the state expects to control 35,000 GPUs, while the private sector will buy an additional 15,000, bringing Korea’s AI computing infrastructure to a total of 50,000 GPUs.

The government also plans to expand the number of AI graduate schools from 19 to 24 and provide monthly stipends of 1 million won to “top-tier” talent, along with overseas training opportunities. A total of 1.4 trillion won will be invested to nurture 11,000 advanced AI specialists.

Physical AI applications such as robotics, automotive technology and shipbuilding will receive concentrated support. Roughly 6 trillion won will be invested over five years, with 500 billion won annually, in robotics and other key projects, which will be exempted from preliminary feasibility studies for quicker rollout. Another 900 billion won will be allocated to apply AI to 300 consumer products, including smart mirrors that recommend cosmetics based on skin analysis and devices that interpret infant cries for new parents.

R&D spending overall will rise 19.3 percent from this year to 35.3 trillion won, the largest increase on record. Of that, 10.6 trillion won will go into core technologies such as AI, biotechnology, content and defense, including silicon carbide power semiconductors, which consume less energy than conventional chips.

President Lee Jae Myung speaks during a Cabinet meeting at the presidential office in Yongsan, central Seoul on Aug. 29. [JOINT PRESS CORPS]

National Growth Fund and concerns

The government will inject 1 trillion won into the National Growth Fund, which aims to mobilize over 100 trillion won in financing for high-tech industries. Half of the fund — 50 trillion won — will be raised by the Korea Development Bank (KDB), with the rest coming from pension funds and private investors.

Critics warn that the government’s 1 trillion won contribution, classified as subordinated capital, would be used to absorb initial losses, effectively making taxpayers responsible if the fund underperforms. Similar government-backed funds — including the Green Fund under the Lee Myung-bak administration, the Unification Fund under Park Geun-hye and the New Deal Fund under Moon Jae-in — lost momentum after administration changes and saw poor post-management.

Experts also point out that the government’s AI investment lacks specific projects, raising concerns that funds may be hastily funneled into unviable ventures.

“Successive governments have promoted new industries at the start of their terms, but vague plans often led to waste,” said Jeong Se-eun, an economics professor at Chungnam National University. “The government needs to present a clearer blueprint on how it will invest in AI and what outcomes it expects.”

During the Moon administration, funding for AI-related data projects surged from 5 trillion won in 2018 to 12 trillion won in 2022, but a Board of Audit and Inspection probe later found widespread mismanagement. For example, out of 360 AI datasets built between 2020 and 2021 with a budget of 702 billion won, 122 sets worth 114.8 billion won went unused.

“Tripling resources for a single sector is highly unusual, so some problems may occur during execution,” said Budget Office Director Yoo Byung-seo. “But we will manage the programs tightly through the AI committee.”

Democratic Party Rep. Park Chan-dae, center, speaks during a conference on normalizing the R&D budget at the National Assembly in Yeouido, western Seoul, on Jan. 9. [NEWS1]

Other allocations

The government also set aside 2.1 trillion won to respond to follow-up measures from Korea-U.S. tariff negotiations. This includes 1.9 trillion won in financing packages, coordinated with the KDB, the Export-Import Bank of Korea and the Korea Trade Insurance Corporation, to support $350 billion in investments related to the trade deal.

A Korea-U.S. technology cooperation center will also be established to support the "Make American Shipbuilding Great Again" initiative in the United States in reviving the country's shipbuilding industry, while additional funding will go toward strengthening small Korean shipbuilders’ maintenance and repair capabilities.

For social overhead capital, the budget was raised to 27.5 trillion won, up 2 trillion won from this year. Road construction funding will be cut by 900 billion won, while 1.8 trillion won will be added for metropolitan rail networks. The government also allocated 114.9 billion won for the construction of a small airport on Ulleung Island.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY AHN HYO-SEONG [[email protected]]