S&P Warns Korean Data Center Boom Risks Credit Downgrades

South Korea is set to become a major global hub for data infrastructure, but the scale of investment is outpacing the internal financial capacity of its leading companies. According to a report from Businesskorea, S&P Global Ratings estimates that approximately 1,200 trillion won, or roughly $869 billion, will be allocated to data center construction by 2035. This aggressive expansion positions Korea to rival China in leasable IT load capacity within the Asia-Pacific region.

However, the credit rating agency warns that this rapid growth creates significant financial vulnerability for participating telecom and internet firms. The sheer volume of capital required means that companies cannot rely solely on their own reserves, increasing the likelihood of credit downgrades if they are forced to take on substantial external debt. The disconnect between projected spending and available cash flow is the central concern for investors and analysts watching the sector.

Cash reserves fall short of construction costs

Building a single gigawatt-scale data center can cost up to 70 trillion won. In contrast, the combined cash reserves of major players including SK Telecom, KT, Naver, and GS Group stood at only 17.9 trillion won as of 2025. Their combined operating cash flow was 14.7 trillion won, making it impossible to fund the entire expansion plan through internal resources alone. This gap necessitates a shift toward external financing strategies that may alter the balance sheets of these corporations.

SK Telecom faces the heaviest financial burden

SK Telecom is particularly exposed due to its responsibility for 15 gigawatts of the total 18.4 gigawatt expansion plan. This portion could require up to 1,000 trillion won, a figure vastly exceeding the company’s 2025 capital expenditure of 2.3 trillion won. Consequently, S&P notes that large-scale external capital procurement is inevitable for SK Telecom, posing a direct risk to its credit standing if not managed carefully through partnership structures.

Partnerships offer a path to risk mitigation

S&P suggests that companies can reduce their individual burden by adopting leasing models where clients directly provide chips and servers, which account for about 60% of total costs. Naver, for instance, is pursuing partnerships with Nvidia and Brookfield Asset Management to secure funding for its one-gigawatt target by 2030. While KT has sufficient capacity to handle its 5 trillion won investment independently, the overall sector remains dependent on successful external capital attraction to avoid rating pressures.