▲ AI PRISM* Personalized Economic Briefing
* Editor's note: AI PRISM (Personalized Report & Insight Summarizing Media) is an AI-based personalized news recommendation and summary service developed with support from the Korea Press Foundation. It selects and provides six news items tailored to each reader type.
[Key Issue Briefing]
■ Nvidia Guarantee Controversy: Nvidia has signed a residual-value guarantee agreement worth up to $105 billion covering OpenAI's long-term leased data centers, reigniting debate over circular financing in AI infrastructure investment. Nvidia CEO Jensen Huang pushed back, calling it a way to secure computing resources based on economies of scale and long-term demand forecasts, but the market's skepticism has not easily subsided.
■ U.S. Long-Term Yields at a High: With the U.S. Treasury's large-scale bond issuance and fiscal deficit concerns coinciding, the 30-year Treasury yield has surged to its highest level since 2007, the early stage of the global financial crisis. Japan's 10-year yield has also climbed to its highest in 30 years, and analysts expect that if rising U.S. government debt and a rebound in oil prices push Treasury yields even higher, it could weigh on global stock markets and Big Tech financing.
■ Korea's Sovereign Wealth Fund: The government will submit a bill this month to create a Korean strategic sovereign wealth fund that would invest in strategic industries such as semiconductors, artificial intelligence, materials, parts and equipment, nuclear power and aerospace, as well as in overseas supply-chain companies. According to the government, the fund will be financed by combining government-held shares in public institutions and shares received in lieu of tax payments, plus cash contributions, with actual investment beginning next year.
[News of Interest to Global Investors]
1. Nvidia Backs OpenAI Data Centers With 150 Trillion Won; Jensen Huang Rebuts "Circular Financing"
- Summary: Nvidia lowered the guarantee it will provide for OpenAI's long-term leased data centers to $105 billion (about 149 trillion won), roughly half of earlier expectations, but market concerns remain. On the 17th, OpenAI signed a contract with SB Energy and Nvidia to secure 8 GW of infrastructure at the Ports Pike data center campus in Pike County, Ohio, under an arrangement in which SB Energy builds the facilities and OpenAI leases them for 20 years. Nvidia is extending credit on the condition that it exclusively supplies its AI chips, and if OpenAI withdraws or fails to pay rent, SB Energy will find a new tenant or resell the facilities while also bearing 25% of any remaining losses afterward. CEO Jensen Huang denied the circular-financing criticism in a blog post, but DoubleLine Capital CEO Jeffrey Gundlach criticized the deal, saying assets with uncertain lifespans cannot serve as collateral for long-term debt.
2. U.S. 30-Year Yield at 5.3%, a 19-Year High
- Summary: On the 18th, the U.S. 30-year Treasury yield rose 5 basis points (a basis point equals 0.01 percentage point) from the previous session to 5.31%, the highest level in 19 years since June 2007. The direct cause of the increase was the Treasury's new $25 billion issuance of 30-year bonds on the 13th of this month. When the bid yield hit 5.22%, the highest since 2001, investors turned to selling, pushing up yields in the secondary market as well. On the same day, Japan's 10-year Treasury yield also rose to as high as 2.930% intraday, the highest level since October 1996, and with U.S. government debt surpassing about $40 trillion, Brent crude futures rebounded 2.65% to close at $90.87 amid a worsening war in Iran, adding further upward pressure on yields.
3. Bill to Create Korean Sovereign Wealth Fund Due This Month; Over 20 Trillion Won From Next Year
- Summary: The Ministry of Economy and Finance is pushing to submit a revision to the Korea Investment Corporation Act late this month to create a Korean strategic sovereign wealth fund. The bill is expected to include specific management methods and investment targets. The ministry has previously said the fund would invest in strategic industries such as semiconductors and AI, as well as in overseas supply-chain companies from an economic-security standpoint, and that returns would be used only for reinvestment, government dividends and repayment to the treasury. The initial launch size is expected to reach 20 trillion won—about 16 trillion won in government-held shares of public institutions such as the Korea Development Bank and the Export-Import Bank, plus about 4 trillion won in shares received in lieu of tax payments—plus cash contributions. A ministry official explained that next year's investment is expected to be at least 600 billion to more than 1 trillion won, and that the exact launch size will be included when next year's budget proposal is announced.
[News for Global Investors' Reference]
4. A Review of External Soundness and Foreign Reserves
- Summary: South Korea's ratio of short-term external debt to foreign reserves has exceeded 40%, raising concerns about external soundness. The main driver of this increase is cited as a sharp expansion in foreign investment in won-denominated bonds following confirmation in October 2024 of South Korea's inclusion in the FTSE World Government Bond Index (WGBI), while banks' increased foreign-currency funding and rising trade finance also played a part. However, a review of 13 indicators including foreign-currency liquidity coverage found that external soundness is currently very strong in most respects and has improved structurally compared with the 1997 financial crisis and the 2008 global financial crisis. Analysts note that while the country met the Greenspan-Guidotti and International Monetary Fund (IMF) Assessing Reserve Adequacy (ARA) standards, it fell short of the strictest Bank for International Settlements (BIS) standard, leaving room to strengthen its buffers.
5. Won Strength Complicates BOK's Calculus; Won-Dollar Rate Ends Lower
- Summary: On the 18th in the Seoul foreign-exchange market, the won-dollar rate closed at 1,411.80 won, down 1.20 won from the previous session's close. Following the U.S. consumer price index (CPI) and producer price index (PPI), July retail sales also fell 0.6% from the previous month, well below market expectations. This spread expectations that the U.S. Federal Reserve would hold rates in September, and foreign net buying of 91.4 billion won in the stock market along with exporters' selling of dollars drove the rate lower. In the afternoon, however, the KOSPI closed down 108.11 points, or 1.55%, at 6,869.83, weakening risk appetite and reversing part of the decline. Barclays noted that the won has been the strongest of the major currencies since July and said won strength is likely to become a more important variable for the Bank of Korea's monetary policy than before.
6. Global IPO Proceeds Triple, but 42% Concentrated in SpaceX
- Summary: Funds raised in the global initial public offering (IPO) market in the first half of this year reached $205.1 billion (about 289 trillion won), triple the same period a year earlier and the strongest showing in five years since the first half of 2021. However, with trading centered on large-cap stocks, the number of IPOs rose just 8% to 689. The U.S. share jumped to 75%, and SpaceX alone, which listed on the Nasdaq in June, drew $86.25 billion—42% of global proceeds. Meanwhile, European Central Bank (ECB) economists warned that investors with excessive confidence and overly optimistic outlooks are driving the tech boom, making a correction in U.S. tech stocks unavoidable, and a rise in discount rates from higher 30-year yields was also cited as a factor that could drag down the valuations of technology companies.
▶ Read the article: U.S. 30-Year Yield at 5.3%, a 19-Year High
▶ Read the article: Choo Mi-ae Calls for Semiconductor Supremacy—Why the Pressure Over Discharge Water?
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