Videogame stocks slide on Google’s AI model that turns prompts into playable worlds

By Zaheer Kachwala

Jan 30 (Reuters) – Shares of videogame companies fell sharply in afternoon trading on Friday after Alphabet’s Google rolled out its artificial intelligence model capable of creating interactive digital worlds with simple prompts.

Shares of “Grand Theft Auto” maker Take-Two Interactive fell 10%, online gaming platform Roblox was down over 12%, while videogame engine maker Unity Software dropped 21%.

The AI model, dubbed “Project Genie”, allows users to simulate a real-world environment through prompts with text or uploaded images, potentially disrupting how video games have been made for over a decade and forcing developers to adapt to the fast-moving technology.

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

Traditionally, most videogames are built inside a game engine such as Epic Games’ “Unreal Engine” or the “Unity Engine”, which handles complex processes like in-game gravity, lighting, sound, and object or character physics.

“We’ll see a real transformation in development and output once AI-based design starts creating experiences that are uniquely its own, rather than just accelerating traditional workflows,” said Joost van Dreunen, games professor at NYU’s Stern School of Business.

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

Videogame developers have been increasingly adopting artificial intelligence as a way to stand out in a highly competitive industry dominated by large players. A Google study last year showed that nearly 90% of game developers use AI agents.

However, the use of AI in videogames is a contentious topic, with many fearing that the technology could lead to a wave of job losses, after the industry went through record layoffs over the past few years as it recovered from a post-pandemic slump.

(Reporting by Zaheer Kachwala in Bengaluru; Editing by Vijay Kishore)