Upstage moves to acquire Daum in strategic AI push

Upstage CEO Kim Sung-hoon speaks during a press conference in Seoul, April 16, 2025. Courtesy of Upstage

Korean artificial intelligence (AI) startup Upstage has taken formal steps to acquire Daum, the portal owned by Kakao, in a move that could reshape the country’s AI and digital services landscape.

On Thursday, both Kakao and Upstage approved the signing of a memorandum of understanding (MOU) for a share-swap transaction at their respective board meetings. Under the agreement, Kakao will transfer its AXZ shares to Upstage while acquiring a stake in Upstage. AXZ, which operates Daum, is a wholly owned subsidiary of Kakao.

Upstage plans to deploy Solar, its proprietary large language model, across Daum’s platforms. Services such as Tistory and Daum Cafe hold decades of user data that can be anonymized and used to train AI systems.

The acquisition is expected to strengthen Upstage’s position in the government-led national AI foundation model project, where the use of proprietary AI models is a key evaluation criterion. Upstage, along with LG AI Research and SK Telecom, has already advanced past the project’s first-round selection.

The company plans to collaborate with consortium members, including MakinaRocks, Vuno, Finda and the Korea Electronics Technology Institute, to expand AI services across sectors such as manufacturing, health care, finance, public services and portals.

The deal allows Upstage to enter the AI-powered search market, offering services similar to Naver’s AI Briefing or Google’s AI Search Mode, but powered by its own Solar model.

The planned acquisition is expected to help Upstage grow quickly into a unicorn valued at around 1 trillion won, potentially paving the way for an initial public offering later this year.

For Kakao, the deal allows the company to streamline non-core subsidiaries while keeping a stake in a growing AI business. Since CEO Kakao CEO Chung Shin-a took office in March 2024, Kakao has reduced its affiliates from 147 to 94, focusing on AI and KakaoTalk as core businesses.

If completed, Daum would separate from Kakao for the first time in 11 years. The acquisition is seen as a strategic move that combines AI technology with a nationwide user base, accelerating the development and adoption of new AI services in Korea.