Seoul: South Korea's artificial intelligence (AI) startup Upstage announced it has signed a stake exchange deal with internet giant Kakao Corp. to acquire Daum, the country's second-largest search engine. The agreement marks a significant step for Upstage as it seeks to bolster its capabilities in the AI sector.

According to Yonhap News Agency, Upstage and Kakao's respective boards of directors approved a memorandum of understanding (MOU) concerning the stake exchange. Under the agreement, Kakao will transfer its stake in AXZ Corp., the operator of Daum, to Upstage. In return, Kakao will acquire a stake in Upstage. Details regarding the financial terms of the MOU have not been disclosed.

AXZ, a wholly owned subsidiary of Kakao, was spun off in May as part of a broader strategy to enhance Daum's competitiveness amidst a declining market share. Upstage and AXZ aim to develop new AI-powered services and create business synergies through this collaboration. Upstage is focusing on growth opportunities leveraging its large language model, Solar.

The collaboration is also anticipated to strengthen Upstage's position in a government-led competition to develop a homegrown AI foundation model. Upstage has successfully passed the first round of the contest alongside SK Telecom Co. and LG AI Research.

Sung Kim, co-founder and CEO of Upstage, stated, "The combination of Upstage's AI technology and Daum's wide user base is expected to pave the way for users to access AI more easily and conveniently."