South Korea intends to inject $14 billion into its sovereign wealth fund, betting on AI and data centers

The South Korean government has announced an injection of KRW 20 trillion (approximately $13.9 billion) into the sovereign wealth fund Korea Investment Corporation (KIC), with dedicated investments in artificial intelligence, data centers, and infrastructure. For the first time, domestic assets will be included in its investment scope. This move marks a significant strategic shift for the South Korean sovereign wealth fund.

On July 31, according to Bloomberg, the plan is scheduled for official government statement release on Friday. The announcement comes as the South Korean stock market experiences extreme volatility—earlier this week, the KOSPI index posted a cumulative decline of more than 17%, the largest in recent times, mainly dragged down by rising debt levels and concerns over whether the massive capital expenditures of the two major chip giants are sustainable. Boosted by the news of the injection, the KOSPI index surged as much as 17% during Friday trading, staging a strong rebound.

The South Korean government stated that this injection aims to "proactively respond" to the sustained global capital interest in investing in South Korea, positioning KIC as an "anchor investor" to attract foreign sovereign wealth funds and asset management institutions into the Korean market. The government plans to submit revisions to the Korea Investment Corporation Act to parliament as early as next month, with the new account expected to officially launch operations next year.

Scale of Injection and Funding Source

According to the government statement, a new dedicated account will be established within KIC’s existing structure, with an initial size of no less than KRW 20 trillion, and funding sources including equity contributions from policy banks and other public institutions.

The government emphasized that the new account will maintain a fully independent investment decision-making mechanism and be strictly separated from KIC’s existing foreign reserve management portfolio, to ensure clear risk boundaries between the two asset types.

As of the end of last year, KIC managed assets totaling $232 billion, entrusted by the government, the Bank of Korea, and other public institutions as national foreign exchange reserves.

The most significant change in this adjustment is that KIC’s investment mandate will for the first time extend to domestic assets. Previously, KIC’s function has remained focused on overseas asset allocation and management.

The government stated that the new account will support the growth of strategic industries, generate returns for future generations, and act as a buffer at the levels of national economic security, foreign exchange, and asset markets.

In terms of investment direction, building the AI ecosystem has been identified as the core driver. The government highlighted that South Korea possesses core competitiveness in constructing an AI ecosystem, a strength that continues to attract global capital. Introducing a credible anchor investor will help trigger follow-on allocations from foreign sovereign wealth funds and international asset management firms.

To provide legal grounds for the new account, the South Korean government plans to submit an amendment draft to the Korea Investment Corporation Act to parliament next month, and the new account’s fund operations are expected to officially begin next year.

Overall, the expedited timeline suggests the government seeks to achieve a legislative breakthrough as soon as possible, in order to establish the strategic layout of South Korea’s sovereign capital before the global AI investment landscape becomes further solidified.

Although the government’s statement does not directly link the plan to current market turbulence, the timing of this announcement is quite sensitive.

In the three trading days prior to the announcement, the KOSPI index lost more than 17% in total. Concerns about South Korea’s debt levels and doubts over whether major capital expenditures by chip giants such as Samsung Electronics and SK Hynix can continuously support AI industry demand were the main causes of the recent decline.

This injection plan is the latest component of a series of recent measures by the South Korean government to stabilize the stock market. Following the news, the KOSPI index soared as much as 17% during Friday’s session, with market sentiment visibly restored. Both SK Hynix and Samsung Electronics, the two chip giants, surged sharply.