Morgan Stanley analysts stated that sophisticated artificial intelligence capabilities might help reduce the cost of creating video games by almost half, possibly opening up $22 billion in yearly earnings for game developers worldwide.
The brokerage stated in a report dated Tuesday that the use of AI tools to automate jobs like constructing game environments, developing conversation, and testing software might help shorten production timelines and cut costs, helping improve margins over time.
Gains are unlikely to be dispersed equally throughout the gaming industry, it continued.
According to the Wall Street brokerage, global consumer expenditure on video games is expected to reach $275 billion this year, of which about 20%, or $55 billion, will be poured into game operations and development.
Morgan Stanley said game production, which is typically costly and labor-intensive, could become leaner as AI allows for smaller teams and quicker post-launch adjustments.
Take-Two Interactive’s Grand Theft Auto VI, one of the most anticipated games in the industry, has been in development since about 2018—five years after the release of Grand Theft Auto V—and serves as an example of the scope of contemporary game development. After several delays, it is now scheduled to launch in November 2026.
“We see value concentrating in scaled platforms and discovery, particularly among companies with proprietary data, IP, and live operations,” the brokerage stated.
Those in charge of distribution, data, and engagement might stand to gain the most.
According to Morgan Stanley, major publishers like Take-Two, Electronic Arts, and Ubisoft, which have the scale to deploy AI across multiple titles, could also benefit, as could gaming platforms and operators like Tencent, Sony, and Roblox.
Conversely, firms with weaker franchises, like Netmarble and Playtika, may be under additional pressure as AI reduces the cost of creating mid-scale games, encouraging more competition.
The brokerage stated that game engines like Unity and Unreal Engine must either adapt or face disruption.
AI has the potential to increase income beyond cost reductions by prolonging game engagement and increasing expenditure on add-on material, in-game purchases, and subscriptions.
According to the brokerage, publishers may concentrate on improving current franchises with AI-driven content instead of primarily relying on fresh releases, which would lessen the financial impact.
