Video game stocks fall as Google’s AI model turns prompts into playable worlds

Shares of video game companies tumbled in Friday afternoon trading after Alphabet Inc.’s Google rolled out an artificial intelligence model that can build interactive digital worlds with simple prompts.

Shares of Grand Theft Auto maker Take-Two Interactive fell 10%, online gaming platform Roblox fell more than 12% and video game engine maker Unity Software fell 21%.

An AI model called “Project Genie” that allows users to simulate real-world environments through text and uploaded image prompts could disrupt the way video games are made for more than a decade, forcing developers to adapt to rapidly changing technology.

“Unlike explorable experiences in static 3D snapshots, Genie 3 generates a path forward in real time as you move and interact with the world. It simulates the physics and interactions of a dynamic world,” Google said in a blog post on Thursday.

Traditionally, most video games are built within a game engine, such as Epic Games’ Unreal Engine or Unity Engine, which handles complex processes such as gravity, lighting, sound, and object and character physics in the game.

“As AI-based design begins to create unique experiences rather than just accelerating traditional workflows, we will see a real transformation in development and output,” said Joost van Druenen, professor of games at New York University’s Stern School of Business.

Project Genie also has the potential to shorten long development cycles and reduce costs, as some premium titles take around five to seven years and hundreds of millions of dollars to create.

Video game developers are turning to artificial intelligence as a way to stand out in a competitive industry dominated by big players. A Google study last year showed that nearly 90% of game developers are using AI agents.

However, the use of AI in video games has been controversial, with many fearing the technology could lead to mass job losses after the industry experienced record layoffs over the past few years as it recovered from the post-pandemic recession.