Is AI disrupting the gaming industry? Alphabet Inc. Class C (GOOGL.US) "Project Genie" went online, causing a widespread downturn in the US stock gaming sector.

On Friday, gaming stocks on the US stock market took a big hit, triggered by the announcement of the experimental artificial intelligence (AI) prototype "Project Genie" by tech giant Alphabet Inc. Class C (GOOGL.US). This tool can generate interactive virtual worlds based on simple text prompts or uploaded images, leading to concerns in the market about the potential disruption of the gaming development industry. By the close of trading on Friday, the stock prices of several well-known gaming companies had plummeted. Gaming engine developer Unity Software (U.US) saw a massive drop of over 24%, user-generated content platform Roblox (RBLX.US) fell by around 13%, and "Grand Theft Auto" publisher Take-Two Interactive Software (TTWO.US) also dropped nearly 8%. Additionally, many international gaming companies including South Korea's Nexon Entertainment (NEXOY.US), Poland's CD Projekt (OTGLY.US), France's Ubisoft (UBSFY.US), and Japan's Nintendo (NTDOY.US) and Konami (KONMY.US) were all affected. Alphabet Inc. Class C introduced "Project Genie" in an official blog post, stating that it allows users to generate virtual worlds by describing scenes, characters, and perspectives, and can simulate physics and interaction in real-time. The prototype is currently open to AI Ultra subscribers in the United States. Analysts widely believe that this technology could change the game development model of the past decade and force developers to adapt to rapidly evolving technological trends. Currently, most games are developed using professional software like gaming engines such as Epic Games' "Unreal Engine" or Unity Engine. These programs handle complex tasks such as gravity effects, lighting rendering, sound design, and object character movements. The market is concerned that if AI can significantly simplify world-building, it may impact the demand for professional gaming engines. For platforms like Roblox that focus on user-generated content, if users can easily build worlds with AI, the platform's attractiveness may be diminished. Moreover, Project Genie is expected to shorten the lengthy development cycle and reduce costs currently, the production cycle of some AAA titles can last five to seven years and cost hundreds of millions of dollars. However, the market reaction may be excessive. Industry insiders point out that the current form of "Project Genie" has limited functionality. The generated experience only lasts for 60 seconds and lacks gaming mechanisms, goals, or deep interaction, making it not a complete game development tool. Wells Fargo & Company analysts stated in a research brief that this release does not change their fundamental view that game studios will use AI tools to accelerate development, which is a long-term positive for the industry. The analysts pointed out that Unity Engine has been used as a training platform for the Genie model, and the collaboration between Unity and Alphabet Inc. Class C's DeepMind lab can be traced back to at least 2020. They emphasized that environment generation technology (the core function of Project Genie) has existed for many years and its progress could be integrated into Unity Engine. Unity CEO Matthew Bromberg also commented on social media, stating that advancements in "world modeling" like this serve as a powerful accelerator for creating video games, rather than a threat. He explained that Unity's role is to convert the probabilistic, non-deterministic outputs of AI into structured, deterministic, and fully controllable simulated environments, integrating physics, game logic, networking, and business systems. Despite the controversy, the use of AI in game development is a growing trend. A study by Alphabet Inc. Class C last year showed that nearly 90% of game developers are using AI tools in their work. Joost van Dreunen, a game professor at NYU Stern School of Business, believes that once AI design begins creating unique experiences rather than just accelerating traditional processes, the industry will witness a real revolution in game development and output.