‘Coming for the King’ in AI. OpenAI, DeepSeek & Samsung. ARD #197

South Korea's President Lee Jae Myung proposed a 21.3 trillion won ($16 billion) budget for AI and semiconductor projects by 2027, nearly double the current year's funding. The plan includes 4.7 trillion won for AI development and aims to create a domestically developed AI model. The total budget proposal is 821 trillion won, a 12.8% increase from the current year. Samsung Electronics and SK hynix, major players in the memory-chip industry, are expected to benefit from this investment.

The Kospi index in South Korea rebounded 1.6% after a 2% decline, supported by SK Hynix's 2 trillion won stock buyback program and local investment. SK Hynix shares rose 3.2%. Analysts see last week's drop as excessive, but warn of U.S. event-driven volatility. Korean pension funds made record net purchases, historically linked to positive Kospi performance. The KOSDAQ index rose 1.2%.

SK hynix is expected to achieve a record operating profit of 104 trillion won in Q4, driven by AI memory demand and higher DRAM/NAND prices. KB Securities maintains a 'Buy' rating with a 3.5 million won target price, citing undervaluation and strong earnings growth. The company plans a 100 trillion won shareholder return program, including treasury-share cancellations and cash dividends.

Samsung Electronics and SK Hynix have signed long-term supply agreements (LTAs) for memory chips with multiple clients, driven by AI demand. Samsung has 10 signed contracts and is negotiating with 10 more, aiming for 60-70% of production capacity under LTAs by 2030. SK Hynix has secured contracts with 14 clients, including major cloud providers, and has sold out production capacity through 2029.

South Korea's exports may hit $1 trillion this month, driven by semiconductors. However, Intel's weak guidance and cash flow concerns have raised doubts about AI and chip demand, impacting Big Tech stocks. Samsung and SK hynix are currently benefiting from the semiconductor cycle, but a downturn could significantly affect Korea's economy.

Samsung Electronics and SK Hynix led a 5.7-fold surge in corporate treasury share acquisitions in South Korea this year, totaling 101.92 trillion won. SK Hynix acquired 60 trillion won, while Samsung acquired 22 trillion won. Analysts expect these moves to positively impact future stock valuations.