Google Ramps Up AI Bet, Expanding Investment to 300 Trillion Won

*Editor's Note: 'AI PRISM' (Personalized Report & Insight Summarizing Media) is an 'AI-based customized news recommendation and summary service' developed with support from the Korea Press Foundation. It selects and provides six customized news items by reader type.

1. "Strong AI Demand"...Google to Pour 300 Trillion Won This Year

- Key Summary: Alphabet, Google's parent company, announced on the 22nd that its second-quarter revenue rose 24% year-on-year to $119.8 billion (about 175.735 trillion won). Cloud revenue (a large-scale virtual space connected via the internet) surged 82% from a year earlier to drive earnings, and cloud backlog not yet recognized as revenue also rose sharply from the previous quarter to $514 billion. Accordingly, Alphabet again raised its annual capital expenditure forecast to as much as $195 billion to $205 billion (about 285.98 trillion to 300.61 trillion won). However, with free cash flow posting a negative figure (minus $5.9 billion) for the first time since its listing, concerns over financial burdens stemming from the spending competition are also being raised.

2. 0.6% Growth in Q2..."Even With Negative Growth in Second Half, 3% Possible This Year"

- Key Summary: The Bank of Korea announced on the 23rd that the advance estimate of the real gross domestic product (GDP) growth rate (quarter-on-quarter) for the second quarter came in at 0.6%. This is 0.4 percentage points higher than the 0.2% the BOK forecast this past May, a result of semiconductor exports, consumption, and investment all performing well despite the shock of surging oil prices from the Middle East. In addition, real gross domestic income (GDI) rose 15.6% year-on-year, the highest growth rate in 38 years since the first quarter of 1988. Accordingly, along with an upward revision of the BOK's August economic outlook, the possibility of an additional rate hike in August following July is also being discussed in the market.

3. Japan's 10-Year Bond Hits 30-Year High...Is Government Focus Shifting From Yen to Rates?

- Key Summary: Japan's 10-year government bond yield jumped to 2.91%, its highest level in 30 years, in the wake of the benchmark rate hike. The newly issued two-year yield also recorded 1.500%, its highest in about 31 years, and the five-year yield entered the 2% range again at 2.020%. The Bank of Japan (BOJ), after raising its benchmark rate to 1% last month for the first time since 1995, is also seen as possibly making an additional hike in October due to inflationary pressure from rising Middle East oil prices and the weak yen. Meanwhile, Deutsche Bank diagnosed that the Japanese government's policy focus is shifting from defending the yen to managing government bond yields.

4. Houthis "Attack Saudi Oil Tankers"...International Oil Prices Break Past $98

- Key Summary: International oil prices surged after Yemen's pro-Iran Houthi rebels claimed they attacked the Saudi Arabian oil tankers Encella and Laila in the Red Sea. Brent crude, the international oil price benchmark, recorded $98.42 per barrel on the 23rd in the London market, up 4.35% from the previous trading day, with its gain this month exceeding 30%. If the Houthi attack claim is confirmed to be true, it would be the first case directly targeting a Saudi vessel since the declaration of a maritime blockade, and concerns are also growing over navigation disruptions in the Bab el-Mandeb Strait, which links the Red Sea and the Gulf of Aden. Saudi Arabia exports about 4.9 million barrels per day of crude oil and petroleum products through its east-west pipeline at the Red Sea port of Yanbu, drawing attention to the possibility of a supply chain shock.

5. Won-Yen Exchange Rate Falls Below 900 Won...Lowest in 1 Year and 8 Months

- Key Summary: The won's exchange rate against the yen fell below 900 won per 100 yen on the 23rd for the first time in one year and eight months. The won-yen cross rate stood at 899.46 won as of 3:30 p.m. that day, down 7.96 won from the previous trading day, and at one point during the session fell as low as 898.51 won. While the won strengthened as Korea's second-quarter economic growth rate exceeded market expectations, the yen continued its weakening trend, trading at around 163 yen against the dollar. The won-dollar exchange rate also closed at 1,466.8 won, down 13.3 won, marking the lowest level in about two months since May 7.

6. KB, Shinhan Earn 2.8 Trillion Won From Fees Alone...Both Post Record Quarterly Profits

- Key Summary: KB Financial Group (105560) and Shinhan Financial Group posted a combined net profit of about 3.8 trillion won in the second quarter this year, both setting new records on a quarterly basis. KB Financial's second-quarter net profit was 1.9922 trillion won, up 14.6% year-on-year, and Shinhan Financial's was 1.8201 trillion won, up 17.5%, with an expansion in non-interest income from a strong stock market driving earnings. In particular, the second-quarter net profits of KB Securities and Shinhan Securities surged 182.1% and 91.6%, respectively, leading the improvement in the non-banking sector's performance. However, with the entry into a period of rising interest rates, the won-denominated loan delinquency rate at domestic banks reached 0.67% at the end of May, the highest in 9 years and 7 months, making delinquency management in the second half a key variable for earnings.