Kakao Falls Below 60,000 Won... Is OpenAI the Savior?

Naver and Kakao Compete for AI Leadership
Diverging Bets Between Individual and Institutional Investors
Speculation Grows Over OpenAI Acquiring a Stake in Kakao

Kakao's stock price is experiencing volatility. As investors are split on which of the two domestic IT giants-Naver and Kakao-will emerge as the leading artificial intelligence (AI) stock, the fluctuating share prices of these companies are expected to continue causing mixed fortunes for their shareholders.

According to the Korea Exchange on September 3, Kakao closed at 59,300 won the previous day, down 3.10%. This marks the first time since August 6 that the stock has fallen below the 60,000 won mark at closing. Foreign investors and institutions led the sell-off, offloading a combined total of 64.2 billion won. In contrast, Naver saw the highest net institutional buying for the day (81.2 billion won), with its stock rising more than 4%.

The selling pressure appears to stem from foreign investors and institutions who had previously driven Kakao's rally last month and are now realizing profits. In August, foreign investors and institutions bought 488.8 billion won and 385.8 billion won worth of Kakao shares, respectively, making it the top net purchased stock for both groups. This stands in stark contrast to individual investors, who sold 854.2 billion won worth of Kakao shares during the same period, ranking first in net selling. As a result, Kakao's stock price jumped 7.76% last month, significantly outperforming its competitor Naver, which fell 8.72%.

Owner risk has also weighed on Kakao's stock. On August 29, Kim Beomsoo, the founder and chairman of Kakao's Management Innovation Committee, was sentenced to 15 years in prison and fined 500 million won by prosecutors, which was perceived as a negative factor for the entire group. Kakao Pay declined for four consecutive trading days, while Kakao Games fell for three straight sessions, both closing slightly lower. Kakao Bank, however, managed to rise by over 1%, buoyed by its record-high net profit in the first half of the year. Previously, Chairman Kim was accused of manipulating the market price above the public tender offer price to block a rival bid by HYBE during the acquisition of SM Entertainment in February 2023.

Although investor sentiment toward Kakao has cooled, some argue that it is too early to be pessimistic. Expectations are rising for the second half of the year, driven by KakaoTalk's revamp, the launch of its own AI agent, and collaboration with OpenAI. Nam Hyoji, a researcher at SK Securities, stated, "There are concerns about KakaoTalk introducing a feed-based interface for short-form content, but global precedents show that adding short-form content increases app dwell time and ad exposure, which has significantly contributed to revenue growth." She raised her target price from 78,000 won to 87,000 won.

The collaboration project with OpenAI is also set to be unveiled soon. If ChatGPT is integrated into KakaoTalk, it is expected to enhance the app's accessibility and provide a long-term growth engine. At the 'if(kakao)25' conference, scheduled for September 23-25, KakaoTalk's revamp and new AI services will be announced, with CEO Chung Shinah set to present a joint product with OpenAI on the first day.

Some speculate that OpenAI may acquire a stake in Kakao. Amid legal risks and health issues threatening the business motivation of Kakao's largest shareholder, and as Google, a leader in AI, widens the gap with competitors using its social-based user data, acquiring a stake in a key partner company is seen as a viable option for OpenAI.

Kim Jingu, a researcher at Kiwoom Securities, commented, "Following the sentencing of Kakao's largest shareholder, OpenAI may become even more interested in acquiring a stake in Kakao," adding, "If OpenAI acquires Kakao shares at a premium, it will naturally have a positive impact on shareholder value."