Naver and Kakao were found to have reduced their investments in data centers, a key infrastructure for artificial intelligence (AI), last year. As a result, the two corporations have accumulated more than 10 trillion won in cash. In contrast, the four major U.S. big tech companies—Microsoft (MS), Meta, Amazon, and Google—increased their AI infrastructure expenditure by 47% last year, pouring in $228.4 billion (approximately 326 trillion won).
According to the Financial Supervisory Service's electronic disclosure system on the 16th, Naver (580.3 billion won) and Kakao (505.9 billion won) spent a total of 1.0862 trillion won on facility investment last year. Naver's investment related to data centers decreased by 16.17% compared to the previous year, while Kakao's investment decreased by 29.95% year-on-year.
During the same period, this amount represents only 0.3% of the facility investment made by the four major U.S. big tech companies. U.S. Citigroup estimated that around 80% of the capital expenditure made by the four major big tech companies was used to strengthen AI infrastructure, such as establishing data centers and purchasing graphics processing units (GPUs). Data centers are facilities referred to as the 'AI brain,' and the larger they are, the more high-performance IT services they can provide.
An industry official noted, 'Until the end of 2023, the performance of local AI models was on par with those of foreign big tech companies, but now the gap has widened,' adding, 'Even Korean language services are now outperforming foreign models.' There are discussions in the industry suggesting that Naver and Kakao may have essentially given up on competing with foreign companies using their own AI models.
◇ Naver and Kakao, despite having investment capacity, are not investing in 'AI infrastructure'?
Naver's cash and cash equivalents last year increased by 17.42% year-on-year to 4.1955 trillion won. Kakao also saw an increase in cash liquidity from 5.3892 trillion won to 6.1451 trillion won, representing a 14.03% rise. Cash and cash equivalents are a key indicator of a corporation's investment capacity.
However, examining the ratio of facility investment to revenue reveals that Naver and Kakao are indeed being passive in their AI investments. Naver invested 5.4% of its revenue last year, while Kakao invested 6.4% in data centers. In contrast, the four major U.S. big tech companies spent an average of 17.2% of their revenue on building AI infrastructure.
Investment in AI research and development (R&D) shows a similar trend. According to the Korea Financial Research Institute, Naver's ratio of AI investment to revenue was only 7.2% in the fourth quarter of last year. Kakao was even lower at just 3.6%. During this period, Meta invested 77% of its revenue in AI, while Google invested 54.5%, Amazon 44.2%, and Microsoft 44.1% in AI.
Experts diagnosed that Naver and Kakao's reduction of data center investments seems to stem from the belief that developing their own AI models lacks market competitiveness.
Professor Kim Yong-hee of Sunmoon University stated, 'Naver and Kakao may be at a 'crossroads' as they struggle to keep up with the rapid development of big tech AI models,' and added, 'In Korea, where the AI market is not large, there seems to be structural limits to strengthening their own AI models.'
◇ U.S. big tech threatens the portal and messenger markets with AI weapons
Yoon Hye-young, head of the AI Policy Promotion Team at Korea Information Engineering Services, remarked, 'In terms of both capital and the number of AI papers, Korean corporations cannot compare with U.S. big tech. Therefore, they deemed investment in B2C (business-to-consumer) AI services as 'pouring water into a bottomless pit,' adding, 'I believe Naver and Kakao's AI will be used in areas such as public finance where foreign enterprises have difficulty entering due to regulations.'
The issue is that if Naver and Kakao maintain their current stingy approach to AI investments, the technology gap with U.S. big tech could widen further. The four major U.S. big tech companies are expected to continue making large-scale investments in AI infrastructure this year, following last year's spending. They are forecasted to invest up to $320 billion (approximately 456 trillion won) in AI infrastructure this year.
The IT industry is concerned that the domestic AI market may become dependent on foreign corporations. An industry official stated, 'AI search technologies from Google and Microsoft pose a threat to the market share of Naver and Daum in the portal sector,' adding that 'Meta is also enhancing convenience by adding AI capabilities to the messenger space occupied by KakaoTalk.'
A Naver official commented regarding the reduction in facility investment costs, saying, 'The completion of the 'Each Sejong' data center is being reflected in server life, etc.' A Kakao official explained, 'Due to the impact of our data center construction last year, a base effect occurred leading to significant investment execution in machinery and equipment, etc., until 2023.'