Recently, popular video game stocks like GTA 6 owner Take-Two ($TTWO), game development engine Unity ($U), and sandbox game Roblox ($RBLX) saw huge sell-offs that hammered share prices in the wake of Google’s announcement of a new generative AI tool called Project Genie.
The product claims it can create worlds “generated in real time,” and people quickly put it to use to create rip-offs of Mario and Fortnite, among many others. The generative AI tool seemingly spooked some investors, prompting the stocks to get hammered. But how big of a threat to the industry mainstays is Project Genie, or generative AI systems like it?
“Wall Street has lost the plot again”
Rhys Elliott of Alinea Analytics told GameSpot that “Wall Street has lost the plot again” and that generative AI is “not coming to eat the games industry.”
Some investors may have panicked at the thought that a tool like Project Genie may disrupt the video game industry because Google said Project Genie would allow anyone to generate a game with a simple prompt. But that doesn’t tell the whole story and leaves out numerous essential pieces of context.
“It’s a technical impossibility masquerading as a breakthrough,” Elliott explained. “It’s the same kind of DiSrUpTiOn we saw with web3, blockchain, the metaverse, cloud gaming, and esports. How are they doing again?”
He added: “The reaction to Genie is the clearest indicator yet for what most of us already know: Generally speaking, the stock market fails to understand how games are made and what draws players to them.”
The stock prices for Take-Two, Roblox, and Unity have not fully rebounded since the dramatic dip on Friday, January 30, though Take-Two’s stock did bounce back a bit after the company confirmed that GTA 6 was not delayed again.
Take-Two and Unity’s share values are actually up more than 10% over the past year, including the recent dip, but Roblox has been on a downward trend since October 2025. This general downturn for Roblox may be more related to the lawsuits filed against it and criticisms that the company is not doing enough to protect kids.
Take-Two’s reaction to the stock sell-off
Take-Two boss Strauss Zelnick recently commented on the company’s falling stock price, telling The Game Business that people on Wall Street may be confused about what Project Genie actually does.
“I think the confusion though is… somehow the new technology and the new tools will become entertainment experiences by themselves. That’s just not going to happen. Tools are not entertainment experiences. Creators use tools to create great entertainment,” he said.
Zelnick said he was “surprised about the market reaction” to Project Genie. “Innovation is one of our core tenets. Our three-part strategy is to be the most creative, the most innovative and the most efficient company in the business, and the innovations surrounding AI is definitely driving efficiencies, and we think also can drive creativity. Because as tools get better, our teams can do cooler and cooler things,” he said.
Zelnick also pointed out that Take-Two has always embraced new technologies, and the company has already spun up “hundreds of AI pilots and implementations” to make the most of AI.
“This company was built on the use of machine learning and artificial intelligence,” Zelnick said. “We’re really enthusiastic about what this new technology can mean. I am even more optimistic than I’ve ever been. And I thought the [Google] release was a great sign of things to come. It’s an opportunity, not a problem.”
“All style, no substance”
Project Genie may be a “cool research prototype” in Elliott’s eyes, but he predicts it will follow in the footsteps of other failed Google projects like the gaming platform Stadia. Google generated a lot of hype and excitement about Stadia, and even made some big hires to create teams to make games for it, but it all crashed and fell apart, with Stadia ultimately joining the Google Graveyard.
“Genie follows the same pattern of a flashy PR cycle followed by a research prototype phase with no viable path to a profitable consumer product,” Elliott said. “Genie will be in the Graveyard by 2028.”
The kinds of “games” that Genie can spit out in its current form are not viable game products, in part because Genie appears to be training its model on visual outputs instead of the all-important source code, Elliott believes.
“That’s sort of like trying to build a working Ferrari by looking at photos of a Ferrari. You might get the shape of the frame and color right, and it might look very pretty and impressive, but there’s no engine under the hood. All style, no substance,” he said.
Zelnick has said AI is a compelling technology for game development, but people are largely overstating what it can do. No one will be able to prompt an AI technology with, “Please develop the competitor to Grand Theft Auto that’s better than Grand Theft Auto” and have it deliver something good, he said. Humans will always be needed to make compelling art, and tools like AI may exist to help them, but never to replace human creativity completely, the CEO said.
A recent survey of game developers found that more than 50% of surveyed developers said they believe generative AI is a threat to the video game industry. More than 35% said they were already using generative AI in their processes.
Possible legal issues and bubbles
Genie could also run into plagiarism and copyright issues, which in turn could prompt a company like Nintendo, or theoretically any rights-holder who feels their work is being infringed upon, to take action.
“Nintendo’s lawyers are ruthless, and they’re not going to like this,” Elliott said. “Nintendo has a history of litigating against even fan-made projects using their assets and IP (like AM2R, Pokemon Prism, and Lost in Hyrule). A multi-billion-dollar corporation like Google using its IP to train a commercial AI is a completely different kettle of Magikarp,” Elliott said.
The AAA games business has a long list of serious and systemic issues that are all valid reasons for concern from investors. But Genie is not one of them, Elliott said.
There may be beneficial use cases for generative AI technologies in game development to help developers make games more efficiently, but Elliott said people should “not mistake a bit of efficiency for product evolution.”
“The reality is that generative AI carries every hallmark of a classic venture capital bubble. We’re witnessing billions of dollars in speculative investment chasing an ROI that simply hasn’t materialized,” he said.
Technologies like Genie are coming out now because companies like Google and other giants are trying to “manufacture a new narrative” to hammer home with shareholders in an effort to generate market appreciation, when in reality, the technology may not actually work as promised at scale. This is part of the reason why some observers and experts in the wider technology space have said AI is a bubble set to pop.
“Profound ethical decay”
There is also the matter of ethics, Elliott said, pointing out that there is a “profound ethical decay at the heart of” a generative AI model that fundamentally devalues the medium of video games. Generative AI models train on publicly available assets, and don’t create anything new of their own, after all.
“If games prioritize high-speed, automated output over human intentionality, it risks trading away its creativity, its jobs, and its soul for a library of infinite, tasteless content,” he said. “If everything is procedurally generated by a machine that doesn’t understand fun, then nothing is actually worth playing.”
