Nasdaq Surge Fueled by AI and a New Player: The Stargate Project

1. Background of the Nasdaq Rise: Tech Stocks Driven by AI

The Nasdaq recently experienced a 1.5% increase, drawing significant attention. This surge is primarily driven by AI-related news rather than interest rate concerns.

Notably, the tech-heavy Nasdaq has seen an upward trend, led by investment flows centered around the Stargate Project.

This project is a joint venture involving SoftBank, OpenAI, Oracle, and Middle Eastern AI funds, aiming to establish AI infrastructure. It boasts an initial investment of $100 billion (140 trillion KRW), focusing on AI technology development and infrastructure expansion, primarily in the United States.

2. Key Participants and Their Roles

SoftBank: Responsible for fundraising.
OpenAI: Overseeing operations.
Oracle & Middle Eastern Investors (MGX): Initial equity participants.
Microsoft & NVIDIA: Providing technology.

NVIDIA, in particular, saw a 4% increase after the project's announcement, while Broadcom rose by 2.5%. This trend indicates a rapidly increasing demand for AI technology development.

3. Market Reaction and the Emergence of New Players

This project signals the rise of a new investment network, moving beyond the established Big Tech players (Microsoft, Amazon, Google).

SoftBank and Oracle, previously seen as losing ground in the AI race, are leveraging substantial funds to re-enter the AI market and pursue a rebound.

Following this investment flow, shares of key companies such as SoftBank (up 10%) and Oracle (up 7%) have significantly increased.

Furthermore, Elon Musk posted critical comments about the project, adding fuel to the subtle tension with OpenAI, which has caught the market's attention.

4. Netflix's Earnings Release and AI Investment

Netflix shares surged over 10% due to positive earnings results announced 24 hours prior. This performance underscores the effectiveness of their technology-driven strategies, including AI-powered recommendation algorithms.

5. China's AI, DeepSix, Makes Strides

China is shaking up the global AI market with the release of a new open-source AI language model called DeepSix. This model has secured global competitiveness with its high performance and low operating costs.

Performance: Among the highest level of existing AI models.
Cost: Efficient in both development and operation.

This highlights the advancement of the Chinese AI market and the importance of open-source.

6. Slowing Inflation and Positive Outlook

Recent reports indicate a slowdown in the Tenant Rent Index, raising hopes for a decrease in the CPI (Consumer Price Index). This is crucial data signaling a trend of stabilizing inflation.

7. TikTok Acquisition Possibility and Political Shifts

Trump is open to a potential acquisition of TikTok, with Elon Musk and Larry Ellison (Oracle CEO) at the center of these discussions. This stems from the idea that TikTok must be sold to resolve political and economic issues within the U.S.

< Summary >

Nasdaq up 1.5% driven by AI tech stock surge.
SoftBank, OpenAI's Stargate Project announced: $100 billion initial investment.
NVIDIA, Oracle, Broadcom, and other related stocks show strength.
Netflix up 10% due to improved earnings.
Chinese AI model DeepSix: Innovative in both performance and cost.
Potential for inflation slowdown and signs of economic stabilization.
Crafted by Billy Yang

[Related Articles at Next-Korea.com]

*YouTube Source: [내일은 투자왕 – 김단테]

– 700조원?? 올해 주도주는 결국 정해졌네요!

U.S. Interest Rate Trends and Exchange Rate Outlook: An Easy-to-Understand Summary

Currently, U.S. interest rates are being maintained at a high level. This is significantly impacting the global economy and indirectly affecting the economic policies and exchange rate volatility of many countries, including South Korea. Here, I’ll briefly summarize the key points by category.

1. Current Status of U.S. Interest Rates

Current Situation: The U.S. Federal Reserve (Fed) is maintaining high interest rates to curb the global economic slowdown or rising inflation. This supports a strong dollar policy.
Reasons for High Interest Rates: To suppress inflation and maintain the internal strength of the U.S. economy.
Future Outlook: While there are expectations for interest rate cuts, clear signs of an economic slowdown and explicit price stability (e.g., CPI reaching around 2%) are necessary.

2. Why Are Exchange Rates Important?

Exchange Rates and Exports: A high exchange rate (Korean won depreciation) can enhance the global competitiveness of Korean products and positively impact exports. However, if the exchange rate is unstable, companies struggle with risk management, leading to a decline in market confidence.
Side Effects of a Sharp Rise in Exchange Rates:
1. Potential outflow of foreign capital.
2. Increased costs of imported raw materials and energy.
3. Increased burden on the public due to rising domestic prices.

3. Possibility of Breaking 1500 Won and Associated Risks

Global Coordinated Weakness: If major currencies like the Yen, Euro, and Pound are weakening while the Korean won remains strong, Korean exports could suffer significantly.
Global Dollar Strength: If the dollar continues to strengthen, other countries’ currencies are likely to weaken relatively.
Short-term/Long-term Aspects:
- In the short term, if there is room for the U.S. interest rate to increase further, the pressure for the Korean won to weaken may increase.
- However, if the U.S. economy slows down or the Federal Reserve reverses to interest rate cuts, the Korean won may relatively recover.

4. Responses of the Korean Government and the Bank of Korea

Liquidity Supply: The recent expansion of the Bank of Korea’s RP (Repurchase Agreement) loan lines to commercial banks, savings banks, and community credit cooperatives aims to prevent liquidity crises in advance.
Policy Freeze: Freezing the base interest rate at 3% reflects a desire not to further stimulate exchange rate volatility.
Government Strategy: The government is considering various policy options, including intervention in the foreign exchange market to stabilize the won. Efforts to secure financial stability through short-term liquidity supply are ongoing.

5. Exchange Rates and Psychological Factors

The Problem of “Artificial Demand”:
- The fear that exchange rates will continue to rise creates “artificial demand” beyond actual needs.
- This can lead to temporary spikes, but if rising expectations are dampened or stabilization is achieved, exchange rates may decline rapidly.
Long-term Dollar Weakness Possibility: The possibility of the U.S. transitioning to a weaker dollar through domestic and international policy coordination (e.g., tax cuts and tariff harmonization) should also be explored.

6. Discussion on Curbing Dollar Inflows and the Tobin Tax

Background: During the Trump presidency, policies to impose tariffs and curb capital outflows were discussed.
Examples from Other Countries: Brazil introduced a Tobin tax in 2011 to control excessive foreign capital inflows, which helped curb dollar inflows to some extent and stabilize exchange rates.
U.S. Movements: Figures like Steve Bannon and former USTR representative Robert Lighthizer have actively proposed such tax policy ideas.

7. Future Challenges for the Korean Economy

Maintaining Balanced Growth: Simultaneously solving the challenges of sluggish domestic demand and maintaining export competitiveness.
Policy Flexibility: Securing flexibility by appropriately utilizing foreign exchange market response measures, along with interest rate freezes or cuts.
Managing Accelerated Inflation: Coordinating unlimited liquidity at appropriate levels and securing long-term system stability.

Crafted by Billy Yang

[Related articles at Next-Korea.com]

*Source : [경제야놀자] “취임 하자마자 관세 전쟁 선포한 트럼프 “정작 더 무서운 것은 따로 있습니다” | 오건영 단장 (1부)

Inheritance and Gift Tax Law Amendment Bill Rejected: Impact and Tax Saving Measures

Inheritance and Gift Tax Law Amendment Bill Rejected

Key Contents

Rejection of the provision to lower the highest tax rate from 50% for those with a tax base of over 3 billion KRW to 40% for those over 1 billion KRW.
Rejection of the proposal to increase inheritance deductions per child from 50 million KRW to 500 million KRW.
Rejection of the plan to ease the 10% tax rate up to 100 million KRW to 200 million KRW.

The proposed amendment generally included provisions to ease the tax burden, but all were rejected. Therefore, existing tax rates and deduction standards remain unchanged, which has been disappointing for many taxpayers.

Gap Between Inheritance Tax and Inflation and Real Estate Value Increases

Current Situation:

Over the past 25 years, inflation and real estate prices have increased by an average of more than 2% annually, with some real estate rising more than 10-fold.
On the other hand, inheritance tax deductions and tax rates remain the same as 25 years ago.

This has led to an increasing burden of inheritance tax, especially for high-asset individuals who own real estate, among other things.

Impact:

Due to the increased inheritance tax burden, some high-asset individuals are considering moving overseas, and the proportion of wealthy individuals leaving Korea is increasing.
The emigration of high-asset individuals can lead to a decrease in various tax revenues, including income tax and corporate tax.

Response Measures: Legal Tax Saving Strategies

1. Pre-Gift Strategy

10-Year Cycle Gifting:
- Utilize deduction limits every 10 years to gift real estate, cash, etc.
- Distribute tax burdens through various donees, such as children and grandchildren.
Start Gifting Early:
- Starting gifting early can save on gift tax for the increase in the original value of the asset.

2. Immigration and Residency Determination

Even when considering immigration, be cautious about the determination of residency under tax law:
- Residency can be determined not only by domestic residence but also by family, income, real estate ownership, etc.
- May be subject to taxation on domestic and foreign assets.
When planning immigration, professional legal and financial advice is essential.

3. Preparing for Tax Law Amendments

Regularly consult with a tax professional to devise new tax-saving strategies in anticipation of possible tax law changes.
Continuously monitor and prepare for amendments, even if changes are slow.

Practical Advice

If staying in Korea and aiming for tax savings, utilize legal strategies.
If attempting to avoid taxes through emigration, clearly understand the tax law residency standards and manage risks.
Implement legal tax-saving methods based on long-term planning and preparation.

< Summary >

The rejection of the inheritance and gift tax law amendment bill means that deduction standards and tax rates remain unchanged. The burden of inheritance tax is increasing due to inflation and rising real estate prices. To save on taxes, it is necessary to implement legal measures based on pre-gifting strategies and an understanding of residency criteria under tax law.