▲ AI PRISM* Personalized Economic Briefing
* Editor's note: "AI PRISM" (Personalized Report & Insight Summarizing Media) is an artificial intelligence-based personalized news recommendation and summary service developed with support from the Korea Press Foundation. It selects and provides six tailored news items for each reader type.
[Key Issue Briefing]
■ Expanding Grid Investment: As expectations grow that the biggest bottleneck in the spread of artificial intelligence will be power grids rather than semiconductors, demand for facility expansion is swelling. Global grid investment is projected to reach $5.9 trillion through 2035, with the Asia-Pacific region expected to attract the largest share of funding.
■ AI-Driven Financial Risks: The International Monetary Fund identified a sharp drop in asset prices and a spike in government bond yields stemming from deteriorating returns on AI investment as key risks to the global economy. Korea's growth forecast jumped to 3.3% on the back of a semiconductor boom, but the IMF warned that failure to prepare for a crisis now will bring a greater shock later.
■ Equity Supply-Demand Vacuum: The KOSPI fell below the 6,000 level during intraday trading as the shock from China's Changxin Memory Technologies (CXMT) coincided with concerns over AI funding. With foreign net selling extending for a sixth consecutive session, retail investors' buying capacity and trading value have both shrunk, leaving few catalysts for a rebound.
[News of Interest to Global Investors]
1. Power Grids Are the Biggest Investment Destination: $5.9 Trillion Globally Over the Next Decade
- Key summary: An assessment has emerged that the core constraint of the AI era is likely to be power grids rather than semiconductors or data center buildings. Shin Joong-seop, Northeast Asia head of Macquarie Asset Management's CSG, cited power grids, power generation and optical fiber as the most direct beneficiary areas created by AI at the 16th Seoul Economic Daily Invest Forum on the 13th. Curtailment — in which wind and solar power cannot be fully used because of insufficient grid capacity — hit record highs in France, Spain and Japan last year, while projects awaiting grid connection in the United States total 2,061 gigawatts, or 1.5 times currently installed capacity. Accordingly, grid investment from this year through 2035 is forecast at $5.9 trillion, with the Asia-Pacific accounting for $2.787 trillion, Europe, the Middle East and Africa for $1.523 trillion, and the Americas for $1.459 trillion.
- Key summary: In the World Economic Outlook released on the 13th, the IMF raised its growth forecast for Korea this year to 3.3% from 2.6%, an upward revision of 0.7 percentage points. The size of the revision far exceeds the global average (0.1 percentage point) and the advanced-economy average (0.4 percentage points), based on a judgment that strong demand for semiconductors will offset the negative effects of war. In its Global Financial Stability Report released the same day, however, the IMF identified three major risks: a sharp drop in asset prices from deteriorating returns on AI investment, a spike in government bond yields driven by inflation and fiscal instability, and expanding cyberattacks accompanying the digitalization of finance. Meanwhile, the U.S. 10-year Treasury yield surged from around 4.2% at the start of this year to 5.24% on Oct. 9, and the IMF warned that if falling AI asset prices, rising rates and an energy shock were to coincide, the core capital ratio of global banks could drop 1.5 percentage points to 11.5%.
3. Advanced Economies' Fiscal Deficits as a Share of GDP at Highest Since COVID-19
- Key summary: The IMF projected that the fiscal deficit (net borrowing) of the 41 economies classified as advanced will reach 5.2% of gross domestic product this year, the highest since 2021, with U.S. net borrowing widening to 8.5% this year from 7.1% last year and China also expected to reach or exceed 8%. Silvana Tenreyro, the IMF's chief economist, noted that as fiscal costs rise and electoral pressure mounts, central banks could again face demands to accommodate more public borrowing. Concentration of growth driven by the AI boom was also cited as a risk factor: the number of countries accounting for 95% of global growth fell to 32 from 54 in April, and China's growth forecast for this year was lowered 0.1 percentage point to 4.5%. In addition, zombie firms — companies unable to cover interest payments with profits for at least three years — were found to account for 21.4% of corporate debt across 10 Asian economies including Korea, China and India, roughly double the 2008 level.
[Reference News for Global Investors]
4. Market Panic Compounded by AI Funding Jitters, With No Rebound Momentum in Sight
- Key summary: The shock from China's CXMT resurfaced after two months, pushing the KOSPI below the 6,000 level during trading on the 13th to its lowest point since July 30. Concerns over AI investment funding and profitability spread after Broadcom Chief Executive Hock Tan said investors were effectively in a casino and Intel CEO Lip-Bu Tan referred to rising capital costs and demands for return on invested capital. In the fallout, Samsung Electronics (005930) closed down 7.39% at 232,000 won and SK hynix (000660) fell 10.09% to 1.443 million won. Goldman Sachs estimated that CXMT's supply capacity will expand to 41% of Samsung Electronics' and 50% of SK hynix's levels by 2028.
5. Different From the Dot-Com Bubble, but Beware of Indiscriminate AI Data Center Expansion
- Key summary: A recommendation has emerged that AI data centers should be assessed not on scale alone but on a comprehensive view of power supply, cash flow and partnerships. Cha Seung-hwan, head of the Asia infrastructure investment team at the National Pension Service, presented actual operable capacity rather than planned capacity, whether facilities can operate once fiber-optic cables are connected, and tenants' credit ratings and credit enhancement as key review factors at the Seoul Economic Daily Invest Forum on the 13th. He also said that if holding periods are extended to as long as 20 years, investors must examine who bears the cost of equipment replacement that comes due every four to six years, as well as renewal risk from tenant concentration. Cha cited as a difference that current AI data centers are contract-based and led by profitable hyperscalers, unlike the dot-com bubble, when speculative construction proceeded without contracts, while assessing the rapid pace of capital inflows and the circular funding structure as similarities.
- Key summary: With domestic equities falling sharply day after day and cumulative foreign net selling this year reaching 203.6541 trillion won, warning signs have appeared over the buying capacity of retail investors who had been absorbing foreign sell orders. Retail investors net purchased 35.0943 trillion won in May and 42.4005 trillion won in June, but turned to net selling of 14.1971 trillion won in September, and net purchases this month amounted to just 6.8909 trillion won. Average daily trading value this month stood at 29.8198 trillion won, down 50.6% from June, while investor deposits totaled 100.4389 trillion won as of the 12th, down 4.2255 trillion won from the end of September and barely holding the 100 trillion won line. At the same time, analysts say the buffer that had absorbed selling pressure has disappeared, with Samsung Electronics having completed a 15 trillion won share buyback and SK hynix having executed 89.32% of its 40 trillion won plan.
