The first strike in the platform operator's 20-year history left flagship services untouched but rattled investors, sending Kakao shares lower and exposing tensions that could complicate the company's push into artificial intelligence.
Two days earlier, a very different scene had played out in Pangyo, often dubbed South Korea's Silicon Valley. Nvidia chief executive Jensen Huang stood inside Naver's 1784 headquarters, linking arms with founder Lee Hae-jin and pledging to build gigawatt-scale AI infrastructure together.
The two scenes, unfolding in the same week and in the same technology hub south of Seoul, highlighted the diverging fortunes of South Korea's twin internet giants as the AI race reshapes the country's technology landscape.
Kakao's union staged a partial strike from 10 a.m. to 3 p.m., including a one-hour lunch break, marking the first industrial action since the 2006 founding of IweLab, the predecessor to Kakao.
Union members marched about 800 meters from Kakao's Pangyo office to a nearby building along Daewangpangyo-ro, condemning what they described as management failures and demanding stronger job security and a more transparent compensation system.
The walkout followed the collapse of a second round of mediation at the Gyeonggi Regional Labor Relations Commission in late May, giving the union legal grounds to strike.
Investors nevertheless reacted cautiously. Shares of Kakao fell 3.4 percent to 38,150 won, while Kakao Games lost 1.28 percent to 8,510 won. KakaoBank ended 1.43 percent up at 24,750 won.
Analysts said the lack of immediate service disruptions should not obscure longer-term risks.
Automated systems can keep platforms running under normal conditions, but traffic surges, unexpected outages, major software updates and cybersecurity incidents still require rapid responses from experienced engineers. A prolonged labor dispute could also slow product development and delay new feature rollouts.
The labor unrest comes at a delicate moment for Kakao as it seeks to reposition itself around AI.
That challenge stands in stark contrast to the momentum enjoyed by rival Naver.
During his visit Monday, Huang firmed up plans for a global AI factory centered on Naver's Gak Sejong data center. The facility is scheduled to begin operating with 55 megawatts of capacity in the first half of 2027 before expanding to 200 megawatts by 2028.
Naver ranks as the 22nd-largest company on the benchmark KOSPI with a market capitalization of about 35 trillion won as of Wednesday. Kakao trails at 53rd place with a market value of around 16 trillion won.
The Nvidia chief's endorsement capped a year of strong momentum for Naver.
The company posted record annual revenue of roughly 12.1 trillion won ($7.9 billion) last year, driven by AI-related monetization and commerce growth. It also joined Nvidia's Nemotron alliance for open frontier AI model development. AMD chief executive Lisa Su visited Naver in March to deepen cooperation on graphics processing units.
Kakao, too, enjoyed an AI-driven rally until growing employee discontent over compensation and restructuring began to overshadow the narrative.
The company forged a strategic partnership with OpenAI in February last year and followed with a separate alliance with Google this year, betting that its unrivaled user base rather than infrastructure would be its pathway into the AI era.
That strategy has shown early signs of traction.
Its partnership with Google, centered on the Kanana AI service within KakaoTalk, remains in the early stages.
Industry observers say the differing partnerships reflect the strengths each company brings to the AI ecosystem. Naver's large-scale data center infrastructure has attracted chipmakers seeking computing capacity, while Kakao's daily interactions with much of South Korea's population appeal to AI model developers looking for distribution.
Still, analysts argue Kakao's AI initiatives have yet to materially improve the metric that matters most for a platform company: user engagement.
"For these services to meaningfully improve the user experience and stand apart from global rivals, agentic commerce must ultimately be realized, with the agent recommending products, taking the lead and completing transactions within the platform," said Lee Jun-ho, an analyst at Hana Securities.
Chief executive Chung Shin-a, whose term was extended by two years in March, has promised to build an agentic AI ecosystem around KakaoTalk while targeting revenue growth of more than 10 percent and an operating margin of 10 percent this year.
Yet Wednesday's walkout suggests her most immediate challenge may lie closer to home.
Before Kakao can convince investors that its AI transformation will pay off, it must first convince the employees expected to build it.
The labor dispute also appears far from over. Following Wednesday's rally in Pangyo, the union announced plans to stage a companywide "Log-off Day" on June 29, during which employees will simultaneously sign out of internal work systems as part of an escalating pressure campaign against management.
While the first strike in Kakao's history left customer-facing services untouched, a prolonged standoff could increasingly affect development schedules, product launches and the company's ability to execute its AI strategy at a time when the gap with rival Naver appears to be widening.
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