Kakao speeds up launch of hyperscale AI

The interior of Kakao's Pangyo Agit building in Seongnam, Gyeonggi Province / Korea Times photo by Seo Jae-hoon

IT firm sees 34% drop in Q2 operating profit

By Park Jae-hyuk

Kakao reiterated Thursday that it will unveil an upgraded version of its hyperscale artificial intelligence (AI) model by the end of this year without further delay. Hyperscale AI, which is best known due to OpenAI's ChatGPT, refers to AI that thinks, learns and judges by learning large amounts of data on its own.

However, amid worsening profitability, Kakao's AI roadmap is also expected to increase its operating costs throughout this year.

“We will not postpone the launch of KoGPT 2.0,” Kakao CEO Hong Eun-taek said during a conference call on second-quarter earnings. “Unless there is an uncontrollable situation, we will release it after October.”

KoGPT 2.0 is a large language model (LLM) which is being developed by Kakao Brain, a Kakao subsidiary specializing in AI technologies. Kakao had initially planned to release the upgraded AI model specializing in the Korean language during the first half of this year, but it announced in May that it would delay the launch to the second half.

After disclosing KoGPT 2.0 by the end of this year, Kakao also plans to unveil an AI-powered chatbot called KoChat GPT during the second half.

“A benchmark test during the development of the foundation model showed that we narrowed technological gaps with global competitors,” Hong said.

Kakao Chief Investment Officer (CIO) Bae Jae-hyun said the company's AI technologies will create a synergy effect through their integration with intellectual property owned by SM Entertainment. The IT firm acquired the entertainment agency in March.

“Kakao Brain's AI foundation model can be applied to SM's virtual humans,” he said.

The CIO also said the company's growing investments in the development of AI technologies will further increase Kakao Brain's losses during the latter half of this year.

During the second quarter, Kakao saw a 34 percent year-on-year drop in operating profit, due to rising operating costs as a result of its large-scale investments in AI-related infrastructures. The 17 percent year-on-year increase in Kakao's second-quarter operating cost was also attributed to its dispersion of data centers so as to prevent the recurrence of service disruptions.

Although the revenue generated from SM allowed Kakao to post a record 2 trillion won ($1.5 billion) in sales during the second quarter, its operating profit stood at 113.5 billion won.

“Kakao Brain's operating loss increased quarter-on-quarter, due to a rise in infrastructure costs for the establishment of the foundation model,” Bae said. “Because of an increase in the AI-related workforce and rising infrastructure costs for establishing the next-generation language model, its loss will be accumulated during the latter half.”

He added the company's investment in AI technologies will peak this year.