Gaming stocks plunged Friday after Google launched Project Genie AI

Stock prices for several video game companies dropped on Friday afternoon following Google’s announcement of a new artificial intelligence tool that can build interactive digital environments from basic instructions.

Take-Two Interactive, the company behind “Grand Theft Auto,” saw its shares fall 10%. Gaming platform Roblox dropped more than 12%, and Unity Software, which makes tools for game developers, declined 21%.

Google’s new system, called “Project Genie,” lets people create virtual worlds by typing descriptions or uploading pictures. The experimental prototype is now available to Google AI Ultra subscribers in the United States. This technology could change the way games have been developed for more than ten years and push creators to adjust to rapidly advancing tools.

Google explained in a Thursday blog post that the system works differently from existing technology. “Unlike explorable experiences in static 3D snapshots, Genie 3 generates the path ahead in real time as you move and interact with the world. It simulates physics and interactions for dynamic worlds,” the company wrote.

While the underlying Genie AI technology has existed since 2024, Project Genie marks its first public release. Google is launching the tool through Google Labs, where it operates as one of the company’s experimental projects.

The system is built on research from DeepMind’s Genie 3 world-model and allows people to create and explore brief interactive settings. Users can also make new versions by changing their initial instructions, though it does not function as a complete game engine or professional development tool.

How does Google’s Project Genie work?

Examples on Google’s Project Genie website demonstrate various scenarios. One shows a cat riding a Roomba vacuum through a living room. Another feature is a car driving across the surface of a rocky moon. A third displays someone in a wingsuit gliding down a mountainside. People can navigate through all these environments as they are being created in real time.

The worlds stay the same when users go backward, meaning old areas will not be replaced with new ones. Any modifications someone makes to the world stay in place as long as the computer running it has memory available.

Most games today get built using specialized software called game engines, such as “Unreal Engine” from Epic Games or “Unity Engine.” These programs manage complicated tasks, including how gravity works in the game, lighting effects, sounds, and how objects and characters move.

Industry transformation ahead

Joost van Dreunen, who teaches about games at NYU’s Stern School of Business, said the industry will see major changes ahead. “We’ll see a real transformation in development and output once AI-based design starts creating experiences that are uniquely its own, rather than just accelerating traditional workflows,” he said.

The new tool might also make game development faster and cheaper. Right now, high-budget games typically require five to seven years to complete and cost hundreds of millions of dollars.

Game makers have been adding artificial intelligence to their work to compete in an industry controlled by big companies. Research from Google last year found that nearly 90% of game developers already use AI tools.

But using AI in games remains controversial. Many workers worry the technology will eliminate jobs, especially after the industry cut thousands of positions in recent years while bouncing back from a slowdown that followed the pandemic. Some analysts now recommend gaming stocks as a safer investment compared to volatile AI sector stocks.

The smartest crypto minds already read our newsletter. Want in? Join them.