Bank of Korea: "Global AI Investments to Grow Significantly for Some Time... Credit Risk Needs Monitoring"

Intensifying Competition for AI Leadership Among Companies and Nations
Mounting Investment Costs and Growing Reliance on External Funding
Future Investment Trends Increasingly Sensitive to Financial Conditions

There is an outlook that the global artificial intelligence (AI) industry, which is the main driver behind the robust performance of Korea's semiconductor sector, will continue its investment expansion trend for a significant period of time. However, it is pointed out that stable profit generation will take time and the industry's growing reliance on external funding means that credit risk should be continuously monitored.

On September 10, the Bank of Korea released an issue analysis titled "Global AI Investment Trends and Risk Factors (Joo Uk · Lee Taek Min)" in its Monetary Credit Policy Report, stating, "Global AI investment is expected to continue increasing for a considerable period, driven by growing demand and competition for leadership among companies and countries. However, with AI investments becoming increasingly dependent on external capital and concerns about profitability remaining, there remains a risk that investment could slow faster than expected if financial conditions deteriorate or uncertainties regarding actual profit generation increase."

Currently, global AI industry investments are rising rapidly thanks to both the training and inference demands needed for high-performance model development by global AI companies. In addition, major U.S. big tech firms are expanding their investments, viewing proactive customer acquisition as the foundation for mid- to long-term revenue growth. Meanwhile, China and the European Union (EU) are also actively supporting AI investment from economic and security standpoints.

Accordingly, major institutions believe that while the scale of global AI investment is likely to moderate after peaking this year, the overall expansion trend will not decelerate sharply. Gartner, a global market research firm, forecasts global AI server and semiconductor spending to rise by 61% year-on-year this year, followed by a 39% increase in 2027 compared to this year and a 19% increase in 2028 over 2027. Bloomberg Intelligence (BI), a research affiliate under Bloomberg, projects that major big tech companies in the United States and China will increase their capital expenditures (CAPEX) by 95% in 2026 year-on-year, 39% in 2027, and 13% in 2028, respectively.

While the revenues of leading AI companies are rising rapidly, stable profit generation is expected to take considerable time. As a result, if profitability verification for AI investments becomes more rigorous and demands for investment efficiency increase, this could increasingly act as a constraint on future investment expansion for companies. The ongoing burden of massive operating and investment costs, along with the spread of open-source and low-priced models, is expected to exert downward pressure on service prices, potentially weakening profitability. Especially if there are delays in securing power supply or if expectations for data center utilization are not met, these factors are likely to further weigh on investment profitability.

The expanding reliance on external funding is also seen as a risk factor. Joo Uk, Head of the International Trade Team at the Bank of Korea’s Research Bureau, noted, "Big tech companies are finding it increasingly difficult to fund investments solely with internal resources, resulting in a higher dependence on external funding. This leads to higher funding costs and the accumulation of potential vulnerabilities, making future investment flows more sensitive to changes in financial conditions."

In fact, since the second half of last year, big tech firms have significantly increased corporate bond issuances, and the market has displayed rising caution toward credit risk, as evidenced by increases in some companies' credit default swap (CDS) premiums. In addition, supplier financing—where suppliers lend to purchasing companies to create sales—can spread financial risk between companies and potentially lead to excessive investment. Furthermore, the use of special purpose vehicles (SPVs) can obscure the true scale of liabilities and risks. Thus, if financial conditions deteriorate under these circumstances, there is a possibility that potential insolvency risks could suddenly come to the forefront.

Joo Uk commented, "Since global AI investment is both a major driver for Korea's robust semiconductor sector and one of the main sources of uncertainty, it is important to continuously monitor the development trends in the AI industry and the accompanying risks."

This content was produced with the assistance of AI translation services.