On the 12th, foreign media analysis suggested that the plunge of more than 5% in the KOSPI index during trading was rooted in debate over the so-called "AI national dividend" proposed by Blue House Policy Deputy Minister Kim Yong-beom.
According to a roundup of Bloomberg reports on the 12th, volatility in the KOSPI that day was directly triggered by a post Kim uploaded on social media. As arguments emerged that the profits of corporations that amassed vast wealth from the AI boom should be socially redistributed, analysis said investors grew confused over potential policy fallout. Kim said that day, "Excess profits in the AI era are, by nature, bound to be concentrated," adding, "Memory corporations and key engineers and those with asset holdings will get big benefits, but a significant portion of the middle class will likely enjoy only indirect effects."
After flirting with the 8,000 mark early in the session and rising to 7,999, the KOSPI quickly tumbled 5.1% to the 7,400 level as Kim's proposal became known during trading. Foreign investors led the sell-off. They offloaded large amounts of Samsung Electronics and SK hynix shares, which had driven the recent market rally. The decline reflected concerns that the two corporations leading the AI supercycle could be hit with a tax bomb to fund 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 recouped part of its losses only after Kim offered further clarification. As volatility grew, Kim drew a line, saying it was not about imposing a new windfall tax on corporations' profits, but about using excess tax revenue that naturally increased thanks to the AI industry boom. Samsung Electronics and SK hynix shares, which had been plunging, then rebounded.
Homin Lee, a strategist at Lombard Odier Singapore, told Bloomberg that given the speed of the sell-off, the AI dividend that Blue House Policy Deputy Minister Kim Yong-beom mentioned without prior notice acted as a catalyst, and added that when he stepped back by denying it was a windfall tax, investor sentiment recovered somewhat. Bloomberg then quoted Kristy Tan, chief investment strategist at Franklin Templeton Institute, as saying this shows Asian countries want to signal shared ownership in a future that includes digitalization and AI, while noting that because the plan would rely on excess tax revenue, taxpayer are highly wary that they might end up shouldering the expense instead of the government.
This episode is expected to remain a case study in how the political sphere is handling fears that AI development will widen the wealth gap. In Korea, calls are already growing for industry leaders to share more of the gains they reaped from the AI boom with society. The Samsung Electronics union has warned of 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 large sums of cash from the market, investors can feel jittery at any time.