What happened
Naver and Brookfield are in advanced negotiations for a financing package of up to $9 billion to expand the Gak Sejong AI data center from 55 MW to 200 MW. Nvidia is contributing $1 billion in direct investment. Major Korean financial institutions, including KB Kookmin, Shinhan, Hana, and Woori banks, are evaluating participation in the deal, which is expected to house approximately 100,000 Nvidia GPUs.
Naver and Brookfield are negotiating a financing structure for the first phase of an expansion of Naver’s Gak Sejong AI factory. The project aims to increase the facility's capacity from an initial 55 megawatts to 200 megawatts. According to The Korea Herald, the financing package under discussion is up to $9 billion, with Nvidia planning to invest $1 billion directly in the project.
The expansion is part of Naver’s longer-term strategy to scale the AI factory to 1 gigawatt. The 200-megawatt phase is expected to house approximately 100,000 Nvidia GPUs. Operations are scheduled to begin at the initial 55-megawatt capacity in the first half of 2027, with capacity rising to 100 megawatts by the end of that year and reaching 200 megawatts in 2028.
Major Korean financial institutions are considering participating in the financing. The Korea Herald reports that KB Kookmin, Shinhan, Hana, and Woori banks, along with the state-run Korea Development Bank, are evaluating the deal. Securities firms including NH Investment & Securities, Korea Investment & Securities, and KB Securities are also considering joining, potentially by arranging and underwriting portions of the financing before selling down positions to other investors.
The initial 12-week negotiation period between Naver and Brookfield expires next Wednesday, though talks are expected to continue as the parties work out the financing structure and assess commercial viability. The final structure, including the specific amount raised from Korean financial institutions, remains under discussion.
Source details: koreaherald.com ↗
Why it matters
This transaction serves as a critical stress test for South Korea's financial sector, which is attempting to pivot from traditional real estate project finance to AI infrastructure. The complexity of financing AI data centers, driven by high GPU costs and uncertain long-term demand, presents a distinct risk profile compared to conventional data centers. Success would establish a viable template for future gigawatt-scale AI projects in the region, while failure would signal limits to investor appetite for the AI boom.
This project represents a significant test of whether South Korea’s project finance market can support the capital requirements of the AI infrastructure boom. Unlike conventional data centers, AI facilities require substantial investment in graphics processing units, which complicates lender calculations regarding demand, utilization rates, and recurring revenue.
Lenders face a different risk profile because GPUs can become technologically outdated faster than conventional infrastructure, making it difficult to estimate residual value and competitiveness over a long financing period. This uncertainty contrasts with traditional data centers often backed by long-term leases with large cloud providers.
The deal could serve as a precedent for financing future large-scale AI infrastructure projects in Korea. If successful, it would provide a template for attracting capital to AI data centers, which are becoming an attractive alternative for Korean financial institutions as the traditional real estate project finance market struggles with high costs and weak economics.
Conversely, if financing proves difficult despite the involvement of Naver, Nvidia, and Brookfield, it would demonstrate the limits of investor appetite for the enormous capital requirements associated with the AI boom, highlighting the gap between AI ambitions and financial feasibility.
Interactive Mechanism: How It Actually Works
Explore the underlying technology behind this development interactively.
What should a useful AI forecast state?
What to watch next
The outcome of the 12-week negotiation period expiring next Wednesday, the final structure of the financing package, and the level of participation from Korean state and private financial institutions. Additionally, monitor the timeline for operations beginning in the first half of 2027 and the subsequent capacity increases to 100 MW and 200 MW.
The expiration of the initial 12-week negotiation period next Wednesday and whether the parties reach a final agreement on the financing structure.
The level of participation from Korean banks and securities firms, which will indicate the domestic financial sector's confidence in AI infrastructure as a viable asset class.
The timeline for the phased expansion, specifically the start of operations at 55 MW in the first half of 2027 and the subsequent increases to 100 MW and 200 MW.
Broader market reactions to the deal, which may influence how other AI data center projects in South Korea are financed and valued.