Naver’s stock has plummeted more than 30% in a single month since the company announced plans to build a 1GW artificial intelligence data center in partnership with Nvidia, but analysts at NH Investment & Securities believe the sell-off is overdone.
On the 9th, NH Investment & Securities maintained its ‘buy’ rating on Naver and a target price of 320,000 won (approximately $212.51), representing roughly 66% upside from the previous day’s closing price of 192,700 won. The firm’s view is that market concerns over AI investment have been excessively reflected in the share price.
“The 1GW data center investment is positive because it allows us to anticipate performance in the business-to-business (B2B) AI market, centered on the Neo Cloud business,” said Ahn Jae-min, an analyst at NH Investment & Securities. “Once data center-related revenue begins to materialize after 2027, the positive impact will likely outweigh the concerns.”
Naver previously announced it would enter the AI factory business in cooperation with Nvidia, building a total of 1GW of AI data center capacity. The strategy marks a shift away from its business-to-consumer (B2C) structure, expanding into the B2B sector by constructing and leasing AI data centers to large enterprises. However, the market reaction was chilly. While data center-related revenue is not expected to ramp up until after 2027, GPU investments alone this year are projected to reach approximately 1 trillion won (approximately $664.1 million), fueling worries about the cost burden. The stock, which had climbed to 288,500 won at the time of the announcement, has since fallen more than 30% over the past month.
“Building a 1GW data center requires 60 trillion to 70 trillion won (approximately $39.8 billion to approximately $46.5 billion), but if annual revenue reaches around 20 trillion won (approximately $13.3 billion) after completion, the data center’s value is estimated at roughly 13 trillion won (approximately $8.6 billion),” Ahn analyzed. “The stock price decline following the announcement is excessive.”
Naver’s second-quarter results are estimated to show revenue of 3.35 trillion won (approximately $2.2 billion), up 15% year-on-year, and operating profit of 550 billion won (approximately $365.3 million), an increase in the 5% range. These figures slightly trail both NH Investment’s own estimates and the market consensus. Advertising revenue is expected to reach 1.48 trillion won (approximately $982.9 million) and service revenue 462.5 billion won (approximately $307.1 million), serving as cash cows, buoyed by the peak season for commerce and advertising markets along with the economic recovery. However, the operating margin is likely to decline quarter-on-quarter due to increased depreciation costs from GPU investments, higher marketing expenses, and one-off costs such as World Cup broadcasting rights fees.
Market attention is focused less on the earnings themselves and more on whether the AI business can establish itself as a new growth engine in the second half. Naver plans to expand the AI briefing feature currently applied to its search service and sequentially introduce generative AI advertising. A key point to watch is whether AI-based search can drive advertising revenue growth, with a cost-per-click (CPC) billing model applied to the generative AI ads.
Kakao, regarded alongside Naver as one of South Korea’s two major platforms, is also pursuing a strategy centered on AI agents. Kakao is working to build an ‘agentic AI’ platform based on KakaoTalk that connects search, recommendations, reservations, and payments. While the number of AI service users is growing rapidly—with GPT in Kakao subscribers reaching roughly 11 million—securities analysts believe that proving service competitiveness and tangible results is more important than user growth alone. Kakao’s stock has also fallen 15.71% over the past month.
Both companies are championing AI as their next growth driver, but their strategies differ. Naver is focusing on diversifying its platform-centric revenue structure through AI advertising and the expansion of B2B businesses such as the AI factory built on its Nvidia partnership. Kakao, on the other hand, is concentrating on integrating AI agents into the KakaoTalk ecosystem to enhance its competitiveness in advertising and commerce.
Analysts across the securities industry agree that the investment thesis for platform companies in the second half hinges not on the launch of AI services themselves, but on how much AI can boost the growth rate and profitability of their existing businesses. “Naver’s AI is contributing to growth, but the lack of visible margin expansion in its business units makes it somewhat insufficient to convince investors,” said Lee Hyo-jin, an analyst at Meritz Securities. “Whether the AI business contributes to earnings will be the key variable for a corporate value re-rating.” Lee Jong-won, an analyst at BNK Investment & Securities, added, “Kakao needs to demonstrate the expansion of AI agent users, service competitiveness, and monetization potential. If the results of applying AI to advertising and commerce are confirmed, a re-rating of corporate value will also be possible.”
The securities industry is closely watching for the point at which Naver’s massive AI investments translate into confirmed earnings. The outlook is that if the B2B business expansion through the AI data center and the growth in AI advertising revenue become visible, the stock could return to an upward trajectory.