South Korea has set its sights on joining the world’s artificial intelligence superpowers, with President Lee Jae Myung unveiling an ambitious plan to triple AI investment and deliver the country’s biggest defense budget increase in six years. In a sweeping budget speech to parliament on November 4, 2025, President Lee laid out a bold vision: transform the nation’s industries, public services, and military by making artificial intelligence the cornerstone of economic and strategic policy.
"We will significantly expand investment to usher in the 'AI era'," Lee declared, as reported by Agence France-Presse. The president proposed 10.1 trillion won (about $7 billion) in AI-related spending for 2026—more than three times the current year’s allocation—aiming to propel South Korea into the ranks of the world’s top three AI powers alongside the United States and China. This initiative is part of a record government budget of 728 trillion won ($506 billion), representing an 8.1% increase over the previous year, according to Bloomberg and other international outlets.
President Lee’s address, his first annual budget speech since taking office in June, comes at a time of political turbulence. The country is still grappling with the fallout from former President Yoon Suk Yeol’s failed attempt to impose martial law, a move that triggered months of unrest and opposition boycotts. Yet, Lee’s message was one of national renewal. He called the 2026 plan “the first national budget for the AI era,” signaling a decisive shift in priorities and a determination to seize the opportunities of rapid technological change. “It’s a matter of national pride that South Korea, which spends 1.4 times North Korea’s annual GDP on defense and is perceived as the world’s fifth most powerful military, continues to depend on others for its security,” Lee said, as quoted by The Associated Press.
Central to Lee’s plan is the integration of AI across the economy and society. Of the 10.1 trillion won AI budget, 2.6 trillion won is earmarked for introducing AI into industry, daily life, and the public sector, while 7.5 trillion won will go toward talent development and infrastructure. The government’s focus spans critical sectors such as semiconductors, automobiles, shipbuilding, and robotics—industries where South Korea already holds significant global clout.
South Korea’s two leading chipmakers, Samsung Electronics and SK hynix, are pivotal to this strategy. Both companies manufacture the memory chips essential for AI products and the power-hungry data centers that underpin the global AI industry. The country’s technological edge was further underscored by a deal announced during last week’s Asia-Pacific Economic Cooperation (APEC) meetings: Nvidia, the U.S. chip giant, will supply 260,000 advanced GPUs to South Korea’s government and major corporations, including Samsung, SK Group, and Hyundai Motor Group. Jensen Huang, Nvidia’s CEO, praised South Korea’s ambitions as “ambitious,” but added, “there’s no reason why Korea cannot achieve it—you have the technology, you have the software expertise and you also have a natural ability to build manufacturing plants,” according to Kurdistan24.
Yet, the path forward is not without complications. President Trump, speaking aboard Air Force One, declared that only U.S. customers should have access to Nvidia’s latest Blackwell AI chips, raising concerns about the timing and scope of the planned GPU deliveries. As reported by The Associated Press, Huang noted that AI data centers and power networks must be established before shipments can begin, leaving the exact timeline uncertain.
Lee’s budget also proposes an 8.2% increase in defense spending, bringing the 2026 defense budget to 66.3 trillion won ($46 billion)—the largest annual rise since 2019. The president emphasized that this investment is not just about military expansion, but about transforming the armed forces into an “elite, smart force” by overhauling conventional weapons systems and integrating AI technology. “We will overhaul conventional weapons systems into state-of-the-art systems suited for the AI era and swiftly transform our military into an elite, smart force,” Lee said during his speech, as quoted by AFP.
This modernization drive is set against the backdrop of a tense and unresolved conflict with North Korea. The United States, South Korea’s key military ally, maintains about 28,500 troops in the country to help deter threats from Pyongyang. Since taking office, Lee has adopted a policy of dialogue with North Korea without preconditions, marking a sharp departure from his predecessor’s more hawkish approach. “We will respect North Korea’s political system and pursue dialogue without preconditions,” Lee has vowed, according to multiple sources, reflecting a broader strategy of engagement amid ongoing security concerns.
The geopolitical balancing act doesn’t end there. South Korea’s economic and technological ambitions are deeply entwined with both the U.S. and China. A recent meeting between President Lee and Chinese President Xi Jinping highlighted the delicate dance between cooperation and competition. During a lighthearted exchange in Gyeongju, President Xi presented Lee with two Xiaomi smartphones. When Lee asked about the security of the devices, Xi joked, “You can check if there’s a backdoor,” referencing the persistent concerns in the U.S. and allied countries about Chinese technology and espionage. As The New York Times noted, this exchange was both a nod to the realities of global tech rivalry and a reminder of the deep economic ties between the two nations.
Lee’s budget proposal, which now awaits parliamentary approval, is likely to pass given his party’s majority. Still, the opposition’s boycott of his speech—rooted in ongoing disputes over the previous administration’s actions—signals that political challenges remain. The president’s vision, however, is clear: South Korea must “construct the highway for the AI era to open a future of progress and growth,” as he put it, referencing the transformative development policies of past leaders Park Chung-hee and Kim Dae-jung.
The stakes are high. South Korea’s push to become a top-tier AI power comes as global competition intensifies, with the U.S. and China already locked in a fierce race for technological supremacy. The country’s ability to leverage its manufacturing prowess, cultivate homegrown talent, and navigate the shifting sands of international alliances will determine whether it can realize Lee’s ambitious goals.
As the world watches, South Korea stands at a crossroads—poised to shape its destiny in the era of artificial intelligence, determined to secure its place among the global leaders of tomorrow.
