Advanced artificial intelligence tools have the potential to dramatically lower the cost base of video game production, cutting development spending by close to half and creating an estimated $22 billion in additional annual profits for game makers globally, according to analysts at Morgan Stanley.
In a note dated Tuesday, the brokerage argued that automating labor-intensive tasks - including building game environments, producing dialogue and conducting software testing - could shorten production schedules and reduce operating expenses. Over time, those efficiencies could translate into improved margins, the note said.
Morgan Stanley projects global consumer spending on video games will reach $275 billion this year. Of that total, the firm expects about 20% - roughly $55 billion - to be ploughed back into game development and operational costs. Because development traditionally requires significant resources and personnel, the firm suggests AI could make the process leaner by enabling smaller teams to produce content and by accelerating post-launch updates.
The brokerage pointed to the scale and resource intensity of modern development cycles as context for the potential impact. As an example, Take-Two Interactive’s Grand Theft Auto VI has been in development since around 2018 - roughly five years after the release of GTA V - and is currently scheduled for a November 2026 launch after several delays.
On where the gains may settle, Morgan Stanley emphasized concentration of value: "We see value concentrating in scaled platforms and discovery, particularly among companies with proprietary data, IP, and live operations," the note said. "Biggest beneficiaries may be those who control distribution, data, and engagement." The brokerage suggested gaming platforms and operators such as Tencent, Sony and Roblox could be primary beneficiaries, while large publishers with the scale to apply AI across multiple titles - including Take-Two, Electronic Arts and Ubisoft - also stand to gain.
By contrast, Morgan Stanley warned that companies with weaker franchises may face increased pressure. It named Playtika and Netmarble as examples of firms that could be challenged as AI lowers the threshold and cost to produce mid-scale games, thereby inviting more competition. The brokerage also flagged tools providers: "Game engines such as Unity and Unreal Engine face a more binary outcome: adapt or be disrupted," it wrote.
Beyond cutting costs, Morgan Stanley noted that AI could help lengthen the commercial life of games by keeping content fresh, which in turn could lift revenue from add-on content, in-game purchases and subscriptions. Rather than relying primarily on new releases, publishers could emphasize upgrading existing franchises through AI-driven content, which could help smooth financial performance.
Also contained in the original briefing was an investment-oriented promotion describing a stock selection tool called ProPicks AI. That text notes the tool evaluates companies using more than 100 financial metrics and cites past winners including Super Micro Computer (+185%) and AppLovin (+157%), and invites investors to compare Electronic Arts to other opportunities. The promotional copy is presented separately from Morgan Stanley’s analysis.
Takeaway - Morgan Stanley’s analysis suggests AI-driven automation could materially reduce game development costs and unlock roughly $22 billion in annual profits, but the benefits are expected to be unevenly distributed across platforms, large publishers, smaller studios and engine providers.