PUBG maker Krafton is an AI defense company now, signs deal with Korean aerospace firm that includes investment of up to $1 billion aiming 'to expand the physical AI ecosystem'

PUBG maker Krafton is getting into the defense business: The company has signed an investment deal with Hanwha Aerospace that aims to "develop and commercialize technology across various sectors, including defense," with a particular focus on "physical AI."

Krafton formalized its intent to become an "AI-first company" in 2025, a move that included a commitment to spend $70 million on a GPU cluster that will "serve as the foundation for accelerating the implementation of agentic AI." Agentic AI is, simply put, AI that operates with some degree of autonomy: You tell it what to do, and it goes and does it. Kind of like me!

Physical AI, as defined by Nvidia, "lets autonomous systems like cameras, robots, and self-driving cars perceive, understand, reason, and perform or orchestrate complex actions in the physical world." I am compelled at this point to state that, despite the most fervent wishes of grasping AI tech executives, AI neither understands nor reasons anything, but for now we'll just roll with it.

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The announcement of the deal says Krafton's "experience in operating large-scale game data and physics-based virtual worlds serve as core assets in training and verifying physical AI software." It's essentially the brains, in other words, while Hanwha provides the muscle, in the form of everything from space launch systems and aircraft engines to artillery, armored vehicles, air defense hardware, fire control systems, and precision guided munitions.

The deal includes both a "strategic alliance" between Krafton and Hanwha "to develop and commercialize technology across various sectors, including defense," as well as a commitment on the part of Krafton to invest up to $1 billion into a Hanwha Asset Management fund that "aims to expand the physical AI ecosystem and strengthen technology competitiveness."

If your immediate reaction to 'autonomous AIs for in-world weapons' is that they're inventing terminators, well, I don't want to sensationalize or anything but yes, that's exactly what's going on. And maybe I'm stretching the definition of "exactly" here just a little bit, but Krafton CAIO Kangwook Lee—also the CTO of Ludo Robotics, a US-based "AI and robotics laboratory dedicated to the advancement of physical AI"—recently posted a message on X that led with this very distinctive image, and you can make of it what you will:

Krafton CEO Kim Chang-han sealed the 'I find this all rather alarming' deal by saying he expects the partnership to result in "a global defense technology company like Anduril," the company founded in 2017 by Palmer Luckey that specializes in "advanced autonomous systems" and bemoaning the decline of the American empire.

Kim is also known for his personal enthusiasm for AI: After being advised by his team that trying to avoid paying a $250 million earnout to the heads of Subnautica 2 developer Unknown Worlds would likely end in legal action, for example, he reportedly turned to ChatGPT for a second opinion and followed its advice instead. Krafton was subsequently demolished by the former heads of Unknown Worlds in a lawsuit filed after Kim terminated them in what the judge said was a "pretext" to avoid paying the $250 million earnout.