Investing.com — Morgan Stanley said Google\u2019s launch of its Genie 3 world model has intensified fears of disruption across the video games industry, after shares in several major companies slumped following the announcement.<\/p>\n
Analyst Matthew Cost said the launch \u201chas sparked fears that world models could disrupt how video games are produced,\u201d with potential implications for Unity, Roblox, Take-Two Interactive and AppLovin.<\/p>\n
The model, released to subscribers on 29 January, prompted a sharp market reaction, with Unity down 24 percent, AppLovin off 17 percent, Roblox falling 13 percent and Take-Two losing 7 percent.<\/p>\n
Morgan Stanley said Genie 3 has become \u201ca key debate for the game industry this year.\u201d<\/p>\n
\u201cLong term, incumbents face two paths: adapt existing tools and frameworks to integrate AI or risk being disrupted by these new technologies,\u201d stated Cost.<\/p>\n
Under the first scenario, incumbents integrate AI tools into existing engines, such as Unity and Roblox Studio, to automate tasks like coding and asset creation.<\/p>\n
Morgan Stanley believes the second scenario, in which world models replace current technology, looks simpler in theory but carries major technical obstacles.<\/p>\n
The bank argued that while world models can already generate \u201cplayable, video game-like worlds,\u201d they suffer from structural limitations.<\/p>\n
The analysts said key issues, such as \u201cdeterminism, memory, and updates,\u201d may prove difficult to resolve. Because world models are probabilistic rather than deterministic, they lack a central \u201csource of truth,\u201d meaning multiple players could see inconsistent game states.<\/p>\n
Cost said these challenges suggest Scenario 1 is more likely, with companies using AI to enhance production while \u201cleveraging existing solutions\u201d rather than replacing established engines outright.<\/p>\n
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