In Depth: Video Game Studios Bank on AI Future

Video game studios are increasingly leveraging artificial intelligence (AI) to transform the landscape of game development, both in terms of design and the player experience. In recent years, AI has moved from a supplementary tool to a core component driving innovation and efficiency in the industry. A prominent example of AI’s influence is “Whispers from the Star,” a newly released game on Steam developed by the startup Anuttacon. This game invites players to steer a stranded astronaut's fate via open-ended, AI-driven conversations, earning mostly positive reviews since its launch[para. 1][para. 2][para. 3].

Anuttacon’s founder, Cai Haoyu – also a cofounder of Mihoyo Co. Ltd. – has been vocal about AI’s disruptive potential. A year prior, Cai forecasted that AI-generated content would radically shrink the game development field, reducing the need for most professional developers and leaving it dominated by a handful of exceptional designers and hobbyists[para. 4]. This prediction aligns with broader industry changes, as studios now increasingly employ AI-powered non-player characters (NPCs), smarter AI teammates and opponents, and AI-assisted plot generation[para. 5].

In China, a review of mid-year reports from 23 listed gaming companies reveals that most have incorporated AI into their pipelines for purposes such as asset generation, analytics, translation, customer support, and advertising[para. 6]. Some companies, like Unity Technologies and venture capital firm Arcadia Games Ventures, are pushing toward “AI-native” games, where virtually all content—visual effects, environments, and interactions—is generated by AI and directly tailored to user expectations[para. 7][para. 8][para. 9][para. 10].

A current drawback of traditional, pre-programmed NPCs is their lack of realism and dynamism. To remedy this, studios like NetDragon Websoft developed a smart NPC system for its game “Conquer,” training the AI on millions of player match recordings. This innovation led to a notable 40% increase in new user retention rates after implementation[para. 12]. Other giants, such as Giant Network Group, harness foundational AI models from tech conglomerates like Tencent and Alibaba to create collaborative AI-human gameplay[para. 13].

AI is also empowering user-generated content (UGC), from customizing character appearances to constructing entire scenes based on textual descriptions, as highlighted by Zhang Yundong of Tencent. Recent advancements in large language models (LLMs)—in particular, their improved context length—allow AI to better process and fulfill complex player requests, making UGC experiences richer[para. 15][para. 16][para. 17][para. 18]. Consequently, developers are encouraged to equip players with more advanced AI tools for content creation[para. 19].

However, AI adoption is driving significant workforce changes. Some studios, including an Israeli Web3 game developer, have laid off up to 25% of employees by automating data analysis and integration tasks[para. 21][para. 24]. Major Chinese companies are increasingly disbanding integration teams in favor of third-party AI solutions—emphasizing proprietary data as a key asset, as with NetDragon’s NPC improvements and Tencent’s suite of AI-powered design tools[para. 25][para. 27][para. 28][para. 29].

Despite these advancements, concerns are rising over the overuse of AI. A 2025 survey showed that about 7% of the games on Steam now disclose AI usage, up from 1,000 games a year ago to nearly 8,000, and about 20% of new titles make similar disclosures. While popular for generating assets and marketing materials, AI is sometimes criticized for generating bland or generic content, which can undermine originality and frustrate gamers, especially when undisclosed as in the case with “The Alters” by 11 Bit Studios[para. 33][para. 34][para. 35][para. 36][para. 37]. Gamers increasingly demand transparency regarding the extent of AI-generated elements in the games they play[para. 38][para. 39].