The video game industry could unlock as much as $22 billion in annual profit if studios use advanced artificial intelligence tools to cut development costs.
The bank said AI could automate work such as building game environments, generating dialogue, and testing software, helping publishers shorten production timelines and reduce costs by nearly half over time.
AI is being pitched as a margin story, not just a creative tool
Reuters reported that Morgan Stanley expects global consumer spending on video games to reach $275 billion this year, with roughly 20%, or about $55 billion, being reinvested into development and operations.
Because game creation is typically expensive and labor-intensive, the bank argued that AI could make production leaner by allowing smaller teams to ship and maintain games more efficiently. That, in turn, could raise margins across the sector.
The estimate is notable because it frames AI less as a futuristic add-on and more as a cost-cutting engine for one of entertainment’s most resource-heavy industries.
Morgan Stanley believes AI could be used not only to speed up development, but also to improve post-launch support, making it easier for studios to update and expand games after release.
The benefits may not be shared evenly
Morgan Stanley also made clear that the gains are unlikely to spread equally across the industry.
Reuters shared that the bank sees value concentrating in scaled platforms and discovery, especially among companies with proprietary data, major intellectual property, and strong live-service operations.
It specifically identified Tencent, Sony, and Roblox as potential major beneficiaries, while large publishers such as Take-Two Interactive, Electronic Arts, and Ubisoft could also benefit because they have the scale to roll AI tools across multiple titles.
By contrast, the report warned that companies with weaker franchises could face more pressure if AI lowers the cost of producing mid-scale games and increases competition.
News.Az said Morgan Stanley pointed to Playtika and Netmarble as examples of companies that may struggle more in that environment. The message is that AI may widen the gap between studios with strong brands and operating leverage and those without them.
Game engines face an “adapt or be disrupted” moment
The report also extended the warning beyond publishers. Morgan Stanley believes game engines such as Unity and Unreal Engine face a more binary outcome, quoting the bank as saying they must adapt or be disrupted.
That suggests AI is not just changing how games are made, but also which tools and infrastructure providers remain central to the development process.
Why the timing matters now
Reuters used Grand Theft Auto VI to illustrate how heavy modern game production has become, noting that the game has been in development since around 2018, roughly five years after GTA V launched, and is now scheduled for November 2026 after multiple delays.
In that context, Morgan Stanley’s thesis is straightforward: if AI can compress development cycles even modestly, it could reshape the economics of blockbuster game making.
Beyond cost savings, AI could also help publishers increase revenue by keeping games engaging for longer and driving more spending on add-on content, in-game purchases, and subscriptions.
For the industry, this means AI could become more than just a tool for testing new ideas. If Morgan Stanley is correct, AI might become one of the main ways to boost profits in the next era of gaming.
