Global video games: Gamer’s digest: AI vs Video games

Research evidence excerpt

20 August 2026

Global video games

Equities

TMT

Gamer’s digest: AI vs Video games

Global

◆ AI risks impaired the sector, but as concerns abated, we

haven’t seen the bounce back, thus presenting opportunities

◆ GTA VI clears competitive calendar and could drive demand;

Microsoft cuts highlight concentrated ecosystem focus

◆ APAC gaming companies more explicit on AI returns vs

Western companies but both directionally positive

AI risks addressed, but recovery stalled: As we wrote in our previous sector note:

Global video games - This genie won’t go back in the bottle (2 Feb 2026), we do not

believe AI would be the final boss for large game studios. Gaming companies with wellknown IP’s will always be able to find a customer base and so even with the risk of more

AI games content, we believe established operators will fare better. Furthermore, despite

the potential advantages to operators from AI, gaming shares have been collateral

damage in the AI vs Software debate and remain down c15% from the Project Genie

release, an overreaction, in our view, but raises opportunities.

AI cost/benefit unclear: AI has been part of the video gaming industry for a number of

years and while generative AI is still in the early stages of use, it is clear to us that they

are not driving cost savings or reduction in staff numbers, but rather productivity benefits.

APAC gaming companies have been more explicit in highlighting AI benefits vs western

names but don’t expect margin improvements.

Themes for 2H and beyond: Microsoft (one of our preferred software plays) gaming cuts

highlight their future focus is on growing key franchises, the ecosystem, and improving

engagement. Next-gen consoles could likely be released in 2028; combined with new

content, we believe demand should pick up from current levels. GTA VI will be a key

driver and could also benefit for industry demand.

Key picks: TTWO: Catalyst will mainly come from the release of GTA VI in Nov 2026

and scope for LT margin expansion supported by uptake of the DTC platform and

advances in AI-powered marketing and tools. Tencent: We like its market leadership,

…