Korean stocks break through 5,000 points! South Korea’s AI strategy is accelerating in an all-round way to create an “Asian AI infrastructure hub”

**Source**: Wall Street Insights

**By Zhao Ying**

Morgan Stanley believes that South Korea is entering an **artificial intelligence-driven "infrastructure reinvestment cycle"**, whose significance is comparable to the semiconductor capital expenditure wave over the past decade. The rapid popularization of AI services in South Korea is systematically pushing up the long-term demand for local computing power, electricity, and power grids. The Lee Jae-myung administration has explicitly elevated AI to a national development strategy, incorporating computing power and energy infrastructure into long-term planning through initiatives such as the **"AI Superhighway"** and the National AI Computing Center.

As South Korea's benchmark stock index, the Kospi, surged past the 5,000-point mark, an economy previously regarded more as a cyclical export market is undergoing a capital repricing.

On Thursday, the Kospi index rose as much as 2.2% intraday, breaking the 5,000-point target previously set by President Lee Jae-myung. Over the past 12 months, the index has surged more than 95%, emerging as one of the best-performing major stock indices globally. Among heavyweight stocks, Samsung Electronics, SK Hynix, and Hyundai Motor led the gains, while the Korean won also edged higher against the U.S. dollar.

On the surface, this is a rally driven by technology heavyweights. But the deeper shift lies in the market’s renewed recognition of South Korea’s position in the global AI industry chain—transforming from a traditional cyclical exporter to a key beneficiary of the AI computing power and data center era. The sustainability of this rally is increasingly tied to a previously underestimated sector: **AI infrastructure**.

Morgan Stanley argues that South Korea’s current infrastructure reinvestment cycle, fueled by AI, is as pivotal as the semiconductor capex boom of the past decade. Unlike previous fluctuations tied to chip prices and export cycles, the core of this round of opportunities lies in this: the rapid penetration of AI services is systematically boosting long-term demand for local computing power, electricity, and power grids, thereby creating a multi-layered investment theme covering data center operations, power equipment, and energy systems.

## AI Service Diffusion Forces Computing Power "Backflow to Local Markets"

The core driver behind the Kospi’s rally remains AI.

On the hardware front, South Korea’s dominant position in the global memory chip market allows it to directly benefit from the wave of data center construction. For Samsung Electronics and SK Hynix, the rebound in memory chip prices has quickly translated into profit recovery and stock price flexibility, which has also become one of the key drivers for the Kospi to break through the 5,000-point mark.

However, Morgan Stanley points out that changes in AI demand are extending beyond the "chip price cycle" to underlying infrastructure.

Over the past year, AI services in South Korea have accelerated their penetration in both enterprise and consumer sectors. On the B-end, AI has begun to be deeply embedded in high-value-added scenarios such as coding, video production, demand forecasting, advertising optimization, logistics route planning, and even DNA analysis. On the C-end, ChatGPT’s monthly active users in South Korea have reached 18 million, and its integration with KakaoTalk is regarded by Morgan Stanley as a **"critical leap from tech enthusiasts to mass users"**.

More importantly, the expected rollout of AI agents in 2026 means that AI application scenarios will evolve from "assisted decision-making" to "direct task execution", leading to a non-linear surge in demand for inference computing power.

Morgan Stanley notes that against the backdrop of rapidly rising AI usage frequency and mounting network and power constraints, **"deploying GPU clusters locally"** has become more advantageous in terms of economy and stability. As a result, the commercial viability of local AI data centers is being repriced.

## "Neocloud" Implementation: South Korea’s Data Centers Enter a Heavy-Asset Cycle

The real turning point comes from the intensive announcement of multiple **"Neocloud-scale" projects**.

According to a Morgan Stanley research report, over the past six months, AI data center projects that South Korea has confirmed or is evaluating include:

- A 100MW-class AI data center built by SK Telecom/AWS in Ulsan;

- A 120MW AI data center by Samsung SDS in Gumi, with a budget of up to 8 trillion KRW;

- The National AI Computing Center project (40MW), bid for by a consortium led by Samsung SDS, with approximately 30% government funding;

- Potential projects jointly advanced by OpenAI with SK Group and Samsung Group, with locations concentrated in South Jeolla Province.

These projects share common characteristics: large scale, long cycle, high power intensity, and heavy asset burden. Precisely because of this, the two major concerns that have plagued enterprises in the past—**token demand uncertainty and GPU depreciation risks**—are being partially offset by "computing power security" and "national strategic attributes".

Morgan Stanley explicitly points out that global AI giants (such as OpenAI and AWS) have begun to take the initiative to request the construction of AI-optimized data centers in South Korea, which in itself is a signal of rising demand visibility.

## The Lee Jae-myung Administration’s "AI Superhighway"

If corporate investment addresses the question of **"willingness to build"**, then government policy is resolving the issue of **"ability to build"**.

Morgan Stanley summarizes the Lee Jae-myung administration’s AI policy with four key words: **Sovereign AI, Infrastructure, Regulatory Reform, Talent Development**. Among these, the **"AI Superhighway"** is the most practically binding component.

The core of this plan is not just GPUs, but the physical infrastructure supporting AI:

- Data centers are classified as **"national strategic technology facilities"**, eligible for tax incentives and policy support;

- Public-private partnership investments totaling approximately 100 trillion KRW are planned;

- A national AI computing center will be established to provide computing power for startups and government projects.

More notably, the government is explicitly promoting the relocation of data centers to non-capital regions, which is highly aligned with its goals of **"revitalizing local economies"** and **"decentralizing power consumption"**. For this reason, South Jeolla Province has become the intersection of policy and projects.

From a market perspective, this policy direction echoes the **"political implication"** of the Kospi breaking 5,000 points. The index hitting a new high is not only a reflection of asset price performance but also reinforces President Lee Jae-myung’s policy commitment to improving corporate governance and repairing long-term valuation discounts. Bulls generally believe that before the **"Korea discount"**—a long-term valuation suppression related to corporate governance—fades completely, there is still room for further market repricing.

## From Computing Power to Electricity: The Real Bottleneck Lies in the Power Grid

The expansion of AI data centers has quickly exposed structural problems in South Korea’s energy system.

South Jeolla Province is rich in renewable energy but has long been constrained by transmission bottlenecks, leaving large amounts of green electricity unable to be effectively transmitted. Morgan Stanley believes that this is the practical starting point for the **"Energy Highway"** plan.

The core of this project is to reconstruct South Korea’s power transmission network through **High-Voltage Direct Current (HVDC)** technology. Compared with traditional alternating current (AC) transmission, HVDC has lower transmission losses for long-distance, large-capacity power delivery, making it more suitable for efficiently transmitting renewable energy from coastal and rural areas to demand centers.

Centered on HVDC, the plan aims to build a U-shaped national transmission backbone running through South Korea’s western, southern, and eastern regions over the next 20 years. Compared with traditional AC transmission, HVDC has distinct advantages in long-distance transmission, large capacity, undersea power delivery, and system stability. By 2030, the west coast HVDC corridor is expected to be completed first, delivering up to 20 gigawatts of clean electricity to Seoul and surrounding areas, and then gradually expanding nationwide in the 2030s.

From an investment logic perspective, AI data centers, power grid upgrades, and renewable energy expansion are being integrated into the same long-term capital expenditure curve.

## From Index to Individual Stocks: AI Infrastructure Becomes the Fulcrum of Repricing

After the Kospi broke through the 5,000-point mark, market attention is shifting from **"how much higher can it go"** to **"where are the structural opportunities"**.

On the direct beneficiary side, **Samsung SDS** is regarded as one of the most certain targets in the AI data center investment theme. Its 120MW AI data center under construction in Gumi, as well as its leading role in the National AI Computing Center project, have positioned it at the core of computing power infrastructure.

On the indirect beneficiary side, the flexibility of power equipment and power transmission & transformation sectors is being re-evaluated. As AI data centers continue to raise requirements for high-voltage capacity and power quality, demand for ultra-high-voltage transformers, GIS equipment, and substation EPC is accelerating, bringing companies such as **HD Hyundai Electric** and **LS Electric** into investors’ view.

In the short term, the Kospi’s strong performance benefits from the AI hardware cycle and easing external uncertainties. But in the longer term, what is truly being repriced by the market is South Korea’s role in the global AI infrastructure system.

This is why more and more investors are beginning to interpret this rally as a **structural transformation** rather than a mere tech stock bull market. As the "Korea discount" gradually fades, AI infrastructure is emerging as the key fulcrum connecting policy, industry, and capital markets.

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