Video game stocks are plummeting in Friday’s midday trading session after tech giant Google (GOOG) (GOOGL) announced “Project Genie,” an experimental research prototype that allows users to create virtual worlds and interact with them.
Names like Unity Software (U) -21.6%, AppLovin (APP) -13.2%, Roblox (RBLX) -12.3%, and Take-Two (TTWO) -9% are getting hit the hardest.
“Even in this early form, trusted testers were able to create an impressive range of fascinating worlds and experiences and uncovered entirely new ways to use it,” Google said in a blog post.
Google said that it has rolled out the “Project Genie” prototype for its AI Ultra subscribers in the U.S.
Analysts at Wells Fargo pointed out that Unity’s engine was used as a training platform for the Genie model and that Unity’s relationship with Google’s DeepMind lab dates back to at least 2020.
“We also note that procedural environment generation (the main feature of Project Genie) is a development capability that has been available for several years; to the extent it was improved, that could also be leveraged within the Unity Engine,” Wells Fargo said in its flash note.
“Nothing in the Project Genie release changes our view that game development studios will leverage AI tools to develop games faster, a secular positive for the category,” Wells Fargo said.
“Consumers may be able to vibe code virtual worlds to explore, but there has to be a platform for online engagement, and there will still be a market for higher quality experiences,” the research firm added.
Wells Fargo said while AI tools may help with faster game development, they would also drive up additional marketing spending for the companies making them.
Other notable stocks in the red: South Korean-Japanese video game developer Nexon (NEXOY), Polish video game company CD Projekt S.A. (OTGLY), French video game publisher Ubisoft (UBSFY), China’s Tencent (TCEHY), and Japanese gaming giants Nintendo (NTDOY) and Konami (KONMY).