South Korea targets 'world's highest performance' sovereign AI model in record new budget

NEW YORK, UNITED STATES - SEPTEMBER 22: President of South Korea Lee Jae Myung addresses the 81st session of the United Nations General Assembly, which brings together leaders and senior representatives of UN member states in New York, United States, on September 22, 2026.

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South Korean President Lee Jae Myung unveiled the country's largest ever budget on Monday, pledging to "boldly invest in AI and future growth engines."

Speaking to the National Assembly on Monday, Lee said total spending for 2027 would rise 12.8% to 820.9 trillion won ($610.14 billion), including 21.3 trillion won for semiconductors, physical AI and AI data centers — nearly double the 2026 level.

A separate 4.7 trillion won will go toward developing a sovereign AI model with what Lee described as the "world's highest performance."

The government also plans to invest heavily into talent, including training 2,000 specialists to "lead semiconductor design and the regional semiconductor industry," while expanding AI education for students, job seekers and existing workers.

South Korea has set up university "contract departments," where students can enroll in company-linked degrees that offer pathways to jobs at firms like Samsung Electronics and SK Hynix before graduation.

Companies help design courses, provide financial support and recruit qualifying graduates.

The record spending plan comes as the International Monetary Fund forecasts South Korea's economy will grow 3.3% in 2026, its fastest pace since the post pandemic rebound in 2021. 

Lee said the higher spending would result in "virtually no net increase in government debt," with newly issued bonds used to repay existing debt.

The budget also increases spending on defense and social security spending for the youth. Defense expenditure is set to rise 8.2% to 73.3 trillion won.

South Korea's strong economic growth has been driven largely by semiconductor exports as global demand for computing power rises with the AI boom.