On the 12th, foreign media analysis suggested that the backdrop to the KOSPI plunging more than 5% intraday was the debate over the so-called "AI national dividend" proposed by Blue House policy chief Kim Yong-beom.
According to a compilation of Bloomberg reports on the 12th, volatility in the KOSPI that day was directly triggered by a post Kim, the Deputy Minister, uploaded on social media. As arguments emerged that the profits of corporations that amassed vast wealth from the AI boom should be redistributed socially, analysis said investors were thrown into confusion over concerns about concrete policy fallout. Kim, the Deputy Minister, said, "Excess profits in the AI era are inherently bound to concentrate," adding, "Memory corporations and key engineers, as well as asset holders, will receive major benefits, but a large share of the middle class is likely to enjoy only indirect effects."
After flirting with the 8,000 mark early and rising to 7,999, the KOSPI instantly slumped 5.1% to the 7,400 level as Kim's proposal became known during trading. Foreign investors led the decline. They dumped shares of Samsung Electronics and SK hynix, which had driven the recent market rally. The drop reflected concerns that the two corporations leading the AI supercycle could be hit with a tax bomb to secure funding for the AI national dividend. In fact, Samsung Electronics' operating profit in the first quarter of this year surged 48-fold from a year earlier. SK hynix is also expected to post massive operating profit.
The market clawed back part of its losses only after Kim, the Deputy Minister, offered further clarification. As volatility grew, Kim drew a line, saying, "The intent is not to impose a new windfall tax on corporate profits, but to use the excess tax revenue that naturally increased thanks to the AI industry boom." Shares of Samsung Electronics and SK hynix, which had been plunging, then rebounded.
Homin Lee, a strategist at Lombard Odier in Singapore, told Bloomberg that "judging by the speed of the sell-off, the AI dividend the Blue House policy chief Kim Yong-beom mentioned without prior notice acted as a catalyst," adding, "When he stepped back by denying that this is a windfall tax, investor sentiment showed a modest rebound." Bloomberg went on to cite Kristy Tan, chief investment strategist at Franklin Templeton Institute, as saying, "It shows that Asian countries want to signal some form of shared ownership in a future that includes digitalization and AI," while noting, "However, because excess tax revenue would be used as the funding source, the taxpayer is very wary that they might end up shouldering the expense instead of the government."
This episode is expected to remain as a case showing how the political sphere is handling concerns about widening inequality from AI advances. In Korea, demands are already growing that industry leaders share more of the gains from the AI boom with society. The Samsung Electronics labor union has signaled a strike, demanding expanded distribution of AI profits from management. Some also say that in a narrow market where Samsung Electronics and SK hynix are absorbing a large amount of cash from the market, investors can feel jittery at any time.