Artificial intelligence is about to transform the gaming industry. Advances in generative AI could cut the cost of developing new games in half, according to a research report released Tuesday by Morgan Stanley. This would create a $22 billion profit opportunity for companies. But it’s not all good news for video game makers. While cost reductions could increase profits for existing developers, the technology also lowers barriers to entry and could increase competition. Morgan Stanley has identified four U.S. companies within its group that could be AI winners. Sony was one of them. The Wall Street bank said the size of PlayStation ownership puts it in a position to manage both the risks and rewards of advances in AI. “Sony’s diverse portfolio is strong.” [intellectual property] Morgan Stanley analysts said in a 63-page research note that the company is well positioned to not only withstand disruption but also benefit from tailwinds from AI. Sony’s ADR, Sony’s one-year peak, has fallen 12% over the past year. Chinese technology giant NetEase will also be a winner, the bank said. Analysts called the company an “industry-leading gaming AI expert” and said its strong talent pool will help it further leverage the technology. Analysts believe it could increase the appeal of Roblox, which allows users to create their own games, and that AppLovin’s existing content, although not a gaming company, could also benefit. Analysts at Morgan Stanley write about AppLovin that anything that can efficiently match demand with the right users should become more valuable, not less. The investment bank also named China’s Tencent Holdings and South Korea’s NCSoft (renamed NC Corp. in March) as winners in AI in gaming. Tencent cannot directly use over-the-counter trading in US NC.
