South Korea Aims for AI Supremacy — Triples AI Budget to 10.1 Trillion Won and Proposes Largest Defence Rise Since 2019

South Korea plans a major fiscal shift to accelerate its artificial intelligence capabilities while strengthening national defence, President Lee Jae Myung announced in his annual parliamentary budget speech.

Key figures: Lee said the government will propose 10.1 trillion won (about $7 billion) for AI next year — more than three times this year’s AI-related budget — as part of an overall 2026 spending plan of 728 trillion won, an increase of 8.1% year-on-year. The defence budget is proposed to rise by 8.2% to 66.3 trillion won, the largest increase in six years if approved.

Driving an "AI era"

President Lee described the AI allocation as "a major transformation aimed at propelling South Korea into the ranks of the world's top three AI powers" alongside the United States and China. Of the proposed AI funds, 2.6 trillion won would be dedicated to deploying AI across industry, daily life and public services, while 7.5 trillion won would go to talent development and infrastructure.

South Korea already hosts global leaders in memory chips — Samsung Electronics and SK hynix — producers of the components that power AI systems and the energy-intensive data centres they require. In a related development, Nvidia CEO Jensen Huang last week announced plans to supply 260,000 of the company's most advanced chips to South Korea; he described the target as "ambitious" but said Korea has the skills and manufacturing capacity to achieve it.

Defence modernisation

Lee said the defence boost will be used to "overhaul conventional weapons systems into state-of-the-art systems suited for the AI era" and to "swiftly transform our military into an elite, smart force." He added that South Korea currently spends "1.4 times North Korea's annual GDP" on defence and is "ranked fifth in global military strength."

The United States, a key ally, stations roughly 28,500 troops in South Korea. Lee, who took office in June, has signalled a shift in tone toward North Korea by pledging to "respect" its political system and pursue dialogue without preconditions, a departure from the more hawkish stance of his predecessor.

The budget proposal now goes to parliament for approval; passage is considered likely given the president's party majority. If approved, the combined push on AI and defence would mark a significant investment in technology-driven security and economic competitiveness.

"We will significantly expand investment to usher in the 'AI era'." — President Lee Jae Myung

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