South Korea Plans Largest AI Investment, 8% Defence Budget Rise for 2026

South Korean President Lee Jae Myung announced a significant increase in the 2026 government budget, allocating 10.1 trillion won ($7 billion) to artificial intelligence (AI) to position South Korea among the world's top three AI leaders alongside the U.S. and China. The overall budget proposal totals 728 trillion won, marking an 8.1% rise, with the defence budget increasing by 8.2% to 66.3 trillion won, the largest hike in six years, aiming to modernize military systems using AI technologies. A portion of the AI funding, 2.6 trillion won, is designated for AI integration across industries and public services, while 7.5 trillion won will support talent development and infrastructure, including data centers. South Korea's strengths include leading memory chip manufacturers Samsung Electronics and SK hynix, crucial for AI hardware, with Nvidia pledging to supply 260,000 advanced AI chips to aid the nation's ambitions. President Lee emphasized transforming the military into a smart, elite force and highlighted South Korea's strategic defense standing, including hosting U.S. troops, while also seeking to reduce military reliance on the U.S. through modernization. With the ruling party holding a parliamentary majority, the budget is expected to pass, reflecting a national drive toward AI-driven economic growth and defence modernization amid evolving geopolitical challenges.