South Korea's president wants 820.9 trillion won to fund AI, chips, and a new windfall fund built on semiconductor taxes
South Korean President Lee Jae Myung went to the National Assembly on November 2, 2026, with a big ask. He wants lawmakers to approve a 2027 budget that puts artificial intelligence at the center of the country’s growth plan.
The total comes to 820.9 trillion won ($615.62 billion), a record 12.8% jump from the previous year.
Where the money goes
The headline item is 21.3 trillion won ($15.97 billion) for AI initiatives and three large-scale projects. Those megaprojects cover semiconductors, physical AI, and AI data centers.
That figure represents a 97.2% increase from the 10.8 trillion won set aside this year. Put simply, the AI line item nearly doubles in a single budget cycle.
“Physical AI” deserves a quick explanation. It refers to artificial intelligence that operates in the real world, such as robots and machines, rather than software that lives only on a screen.
Lee framed the spending as a bold bet on lifting South Korea’s long-term economic growth potential. The pitch to parliament was simple: invest heavily now in the technologies expected to define the next decade.
Defense also gets a bump. Military spending rises 8.2% to 73.3 trillion won, with an emphasis on AI-driven modernization of the armed forces.
A fund built on chip windfalls
The budget’s most interesting structural feature may be a new 162.3 trillion won “Future Response Fund.” It is backed largely by windfall gains from rising semiconductor tax revenue.
The fund has several assigned jobs. It is meant to support growth sectors, youth and regional development, and education. It is also designed to act as a fiscal safeguard.
The “growth for all” pitch
Lee’s budget sits under a broader “growth for all” agenda. The stated aim is to spread the benefits of technological progress beyond a handful of major corporations and regions.
Private money is moving too
The government is not spending in isolation. The budget lines up with private-sector commitments of approximately 800 trillion won toward semiconductor manufacturing, led by Samsung Electronics and SK Hynix.
The credit rating angle
The fiscal plan could carry a bonus for South Korea’s borrowing profile. Citi economist Kim Jin-wook has indicated the strategy may support prospects for an upgraded credit rating.
The research points to the potential for a Fitch upgrade from its current AA- rating. That remains a possibility, not a done deal.
What happens next
The budget now heads into parliamentary review. Approval is expected by December 2, 2026, roughly a month after Lee’s speech.
What this means
For investors, the most direct read-through is to South Korean semiconductor and AI names. A government nearly doubling its AI budget, alongside roughly 800 trillion won in private chip commitments, signals sustained policy support for the sector. Samsung Electronics and SK Hynix sit at the center of that story.
Beyond December’s vote, the things to watch are whether the 21.3 trillion won survives parliamentary review intact, whether Fitch moves on the rating, and whether chip tax revenue keeps flowing at the pace this budget assumes.
