Bernstein raises Naver target price to KRW 330,000, bullish on its B2B AI factory transformation

Overview

This report focuses on Naver's strategic repositioning: the company is shifting from a traditional Korean internet platform to a B2B AI factory model, aiming to leverage its search, cloud software, and high-utilization GPU data center capabilities to capture rapidly growing AI computing demand in Asia. Bernstein believes that Naver's partnership with NVIDIA, potential anchor customers, and 1GW capacity plan improve long-term revenue and earnings visibility, and therefore raises the target price.

Core views

The core view is that Naver's AI factory business could reshape the company's growth trajectory. Management aims to achieve KRW40-50tn in group revenue within five years, of which about KRW20tn would come from new AI factory and AI-driven businesses; if the initial 200MW can be secured through long-term large-customer contracts, it could support an AI factory profit margin of around 20% or higher. However, the transition toward cloud and AI infrastructure will also bring higher capital expenditure, depreciation, and margin volatility.

Analysis framework

The report uses DCF valuation and models AI factory capacity, revenue per GW, quarterly ramp-up, utilization, AI server investment, and a five-year depreciation cycle. On the revenue side, it references a global peer benchmark of roughly KRW20tn per 1GW of capacity; on the cost side, it focuses on GPU and AI server capex, using the depreciation framework of Chinese cloud vendors such as Alibaba as a comparison.

Methodology notes

• Valuation methodDCF

  Deriving the KRW 330,000 target price using DCF

  DCF assumptions include WACC=12%, terminal growth rate=2%, risk-free rate=3.6%, market risk premium=17%, and Beta=0.5; the target price implies a one-year forward PER of 20x for Q2 2027-Q1 2028.

• Operating forecastAI factory capacity model

  Estimating AI factory contribution based on computing capacity and revenue per GW

  The model is based on a capacity ramp from 100MW and 200MW to 1GW, combined with utilization, revenue per GW, capex, depreciation, and long-term OP margin, to assess earnings contribution after 2031-2032.

• Rating frameworkBernstein equity rating

  Definition of the Outperform rating

  Bernstein's Outperform generally indicates that the stock is expected to outperform the relevant market index by more than 15 percentage points over 12 months.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Naver Corporation (035420.KS)

  The covered name in this report; a core Korean internet and AI cloud transformation asset.

  Strengths

  It has a foundation in search and cloud software, and is pursuing an NVIDIA partnership, anchor customers, and 1GW AI factory capacity expansion.

  Weaknesses

  The shift from high-margin digital advertising to a capital-intensive cloud business may bring higher depreciation, financing needs, and operating margin pressure.

  Comparison

  The target multiple is raised from 18x to 20x; the AI factory revenue per GW benchmark references global cloud and AI data center peers.

  Risks

  E-commerce GMV, search engagement, non-core investments, approval of the Dunamu share swap, and AI factory execution and financing are all key risks.

• NVIDIA

  Strategic partner and upstream GPU/Cosmos platform partner; not a rated name in this report.

  Strengths

  If the partnership advances, Naver may gain access to advanced GPUs, the Cosmos platform, and joint development opportunities in AI models, physical AI, and sovereign AI.

  Weaknesses

  Naver is dependent on a key supplier's technology roadmap, supply cadence, and partnership priorities.

  Comparison

  The report positions Naver as an important AI-native cloud partner for NVIDIA outside the United States.

  Risks

  The depth of cooperation, priority of GPU access, and customer conversion still need to be validated.

Key data

• RatingOutperformBernstein maintains a positive rating.
• Target priceKRW 330,000 (previously KRW 290,000)The target price is based on DCF valuation and implies a one-year forward PER of 20x.
• Earnings forecast revision2027-2029 EPS raised by 2-7%The increase is driven by AI data center construction and stronger earnings growth expectations.
• Revenue forecast revision2027-2028 revenue raised by 6-19%; chart figures show 2027-2029 revenue raised by 8-38%There are slight differences across pages in presentation, but both point to incremental revenue from AI data centers.
• AI factory capacity target100MW by end-2027; around 200MW in 2028; 1GW within 5-6 yearsCapacity comes from a combination of leasing, the Sejong data center, and greenfield projects.
• Total capex for 1GWUS$40-60bnManagement estimate, with GPU cost as the main component.
• New revenue opportunityapproximately KRW20tn (2031-2032)From AI factory and AI-driven businesses.
• Long-term margin targetAI factory OP margin around 20%; cloud incremental EBITDA margin of around 30% after deducting GPU depreciationDepends on customer lock-in, capacity utilization, and depreciation pressure.

Impact & implications

For investors, Naver's investment story is expanding from a traditional search, advertising, and e-commerce platform to AI computing infrastructure and a sovereign AI cloud partner. If the NVIDIA partnership, GPU access, and initial 200MW customer contracts materialize, the market may assign a higher growth multiple; but if capex, depreciation, or customer ramp-up fall short of expectations, margins could come under pressure.

Risks

• E-commerce GMV growth is weaker than expected.
• User engagement in the search business declines faster than expected.
• Additional investment in non-core businesses drags on returns.
• The government does not approve the share swap transaction with Dunamu.
• AI factory capex, depreciation, and financing pressure are higher than expected.
• Initial 200MW customer contracts, capacity utilization, or execution of the NVIDIA partnership fall short of expectations.

What to watch

• Whether the initial 200MW secures long-term contracts with major customers.
• Whether the capacity ramp to 100MW by end-2027 and around 200MW in 2028 progresses as planned.
• Whether the NVIDIA partnership can deliver priority GPU access, Cosmos platform capabilities, and joint products.
• Whether the SPV financing structure, strategic partner equity contribution, private equity, and debt financing proceed smoothly while keeping the balance sheet impact on Naver manageable.
• Whether the AI factory's revenue per GW, utilization, depreciation, and OP margin approach management targets.
• The degree of dilution from cloud business expansion to the group's advertising, e-commerce, and overall margins.