Artificial intelligence is set to upend the gaming industry. Advances in generative AI could cut the cost of developing new games in half, according to a research report out Tuesday from Morgan Stanley. That would create a $22 billion profit opportunity for companies. But it’s not all good news for video game makers. While lower costs could boost margins for existing developers, the technology will also lower barriers to entry, potentially heightening competition. Within the group, Morgan Stanley identified four U.S.-traded companies as potential AI winners. Sony was one. The Wall Street bank said the PlayStation owner’s size positions it to manage both the risks and rewards of AI advances. “Sony’s diversified portfolio, strong [intellectual property] base and recurring revenue from live services … position the company not only to withstand disruption but also to benefit from AI-driven tailwinds,” the Morgan Stanley analysts wrote in the 63-page study. SONY 1Y mountain Sony ADRs are down 12% over the past year Chinese tech giant NetEase will also be a winner, the bank said. Analysts called it the “leading game AI expert in the industry,” and said a strong talent pool will help it further leverage the technology. Lower barriers to entry may also boost Roblox , where users can create their own games. AI might enhance the appeal of the platform’s game creation tools, the analysts said, and solidify Roblox’s existing content. AppLovin — while not a gaming company — is set to benefit too. Analysts believe if barriers to entry come down and competition increases among videogame makers, so will the battle for eyeballs in a more crowded field. That will make advertising even more critical if companies want to succeed. “Platforms that can efficiently match demand with the right users should become more valuable, not less,” the Morgan Stanley analysts wrote about AppLovin. The investment bank also named China’s Tencent Holdings and Korea’s NCSoft, renamed NC Corp. in March, as winners from AI in gaming. Tencent trades over the counter in the U.S. NC isn’t directly available.
