Will xAI kill these two gaming giants?

Welcome to AI Collision 💥,

In today’s collision between AI and our world:

• xAI to kill of game making as we know it?
• The wizardry of humankind
• Big Buck Hunter: the revenge

If that’s enough to get the games playing, read on…

AI Collision 💥

“You can’t make a living playing video games all day long.“

I’m a child of the “rad 80s” (as my five-year-old son describes it). Which means I quite literally grew up in the era of video game consoles in the home. We were the first generation of kids that saw an explosion of innovation and development in gaming in the living room.

From the NES, SNES, N64, GameCube and Wii to the Master system, Megadrive, Saturn and Dreamcast, the PS, PS2, PS3, and so on, to the Xbox, Xbox 360 and One.

It was all about the games. And I reckon just about every parent of a kid in the “rad 80s” at some point said what my Dad said to us…

“You can’t make a living playing video games all day long.“

Well, they were wrong.

That is very much a profession these days. Be it through actual professional esports, or through the development, testing and publishing of blockbuster game titles, video gaming is a massive industry worth almost half-a-trillion dollars each year.

And some of the biggest players in the space have been some of the best performing stocks in history.

For example, had you invested just $199 in Electronic Arts (NASDAQ:EA) in 1990 instead of buying a new Super Nintendo, you’d be sitting on $65,670 today.

That’s a 32,900% gain in 34 years.

Had you invested $299 in Activision Blizzard in 1995 (when you could pick up stock (split adjusted) for around 75 cents) instead of buying the first PlayStation, you’d have been sitting on about $37,873 a bit over a year ago… I say a year ago because it was around this time (late October to be precise) that Microsoft finally completed its $69 billion takeover of Activision to bolster Microsoft’s gaming division for $95 a share.

That’s around a 12,500% return in stock price in 29 years.

In short, historically, video gaming has been good for the markets and good for the portfolios.

But with the likes of EA at a market cap today of around $43 billion, Take-Two Interactive (another big game publisher) at around $33 billion, are we going to see another three decades of mega gains from gaming companies… or is their very livelihood at threat?

I say this because this week, Elon tweeted:

Make no mistake, this is a shot across the bow at the likes of EA and Take-Two. Gaming has certainly changed in the last few years. Gaming titles that used to be gigantic revenue generators aren’t doing what they used to either.

It’s still big business, which is why the idea of xAI getting into gaming is such a big deal. When I wrote to you the other day about Ben Affleck’s commentary around how AI would impact Hollywood, well, the same can be said for gaming too.

Things that humans used to do, like endless hours of rendering and character design, will be the grunt work that AI does. Faster, cheaper, non-stop and with no complaints (we’d hope).

It should make the gaming industry more efficient and able it to concentrate more on the stories – the ability to bring worlds and ideas to life that gamers want, not what makes the studio the most money because they have to get a return on capital even to green light a project.

Maybe AI is a real threat to the likes of EA and Take-Two. But maybe it’s exactly what the gaming industry needs in order to stay alive and relevant.

#AD

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Capital at risk. Forecasts are not a reliable indicator of future results.

AI gone wild 🤪

It can be quite easy to get swept away with all the things that are wrong in the world. Particularly of late, it seems like there’s far more pessimism in the world than optimism.

Or maybe that’s always been the case, just a part of human nature. Certainly, the mainstream media knows that fear sells and keeps the readers coming back, so they trade off that pessimism.

But that’s not the energy we carry here at AI Collision.

The world is a bloody AMAZING place, and humankind is the most astonishing species. In our modern world we have mastered the seemingly impossible, the ability to manipulate and bend our environment to our will.

Over the weekend I saw categorical proof at how amazing our world is. It’s a video from the Dutch tech giant ASML (NASDAQ:ASML). With a market cap of around $269 billion it’s one of the biggest companies in the world, full stop. It’s also one of the most important companies when it comes to the rollout of AI tech.

That’s because ASML is a pioneer in the development and manufacturing of advanced photolithography machines. These machines which cost around $380 million each (yes you read that right!) etch the patterns on silicon wafers which form the circuits that make up the AI chips that companies like Nvidia and ARM develop.

In other words, without the wizardry of ASML, arguably our world looksvery different. But to talk about something like a photolithography machine is one thing – to really see what’s going on is another.

And I come back to what I saw over the weekend, this video from ASML explaining how its computational lithography works.

Having seen the above, I couldn’t help but think this is borderline magic. Truly the stuff of wizards. That may have been influenced by the fact the Harry Potter movies were playing on the telly in the background… but you catch my drift.

This is what makes me so excited for what the next 100 years of human evolution and technology development brings. If we can do things like this now, imagine what we’ll be able to do in the year 2100!

Boomers & Busters 💰

AI and AI-related stocks moving and shaking up the markets this week. (All performance data below over the rolling week).

Boom 📈

• Vicarious Surgical (NYSE:RBOT) up 21%
• Appen (ASX:APX) up 13%
• Echo IQ (ASX:EIQ) up 12%

Bust 📉

• Symbotic (NASDAQ:SYM) down 30%
• SK Hynix (KOR:A000660) down 9%
• Vertiv (NYSE:VRT) down 9%

From the hive mind 🧠

• A perfect example of the pessimistic mind. You can let fear take hold, or you can embrace the wonders of humanity. Worried about the impact on the “average” person? Perhaps it will actually lift living standards again and be beneficial – but that of course would be hard to comprehend inside the Hollywood bubble.
• Does AI have a face? Should it have a face? There’s a thing called the uncanny valley, which we can dive into another day. But if your AI (or AI robot) looked like this, would it be easier to accept… or harder?
• Commonwealth Bank (CBA) is one of the world’s largest banks (AU$265bn/£135bn) and it’s going for the integration of AI into its services at full throttle – which is already paying off, big time!

Artificial Polltelligence 🗳️

It’s been a week since we last ran our poll, giving plenty of time to think about this one.

It’s always hard to look forward a decade to consider what the world might look like. But that’s also part of what makes the market and investing so much fun – taking a position, having conviction and going for it.

A decade back and it was Nvidia that was the big call back when its (split adjusted) price was under 40 cents. This rest, they say, is history.

Looking forward though, we are well aware that some things change, some do not. But when it comes to the best, most world-changing AI tech… will things change in a decade?

In hindsight, what I should have added here was a not-yet-public competitor that could sweep in and go up the value charts as well. Nonetheless, there are three distinct leaders here: the incumbent, the rumoured challenger and then the disruptor of all disruptions.

It’s a fair spread. But I would also probably say that in my view, Amazon probably isn’t being strongly considered here, which I think it should be. That’s something I’ll dig into another time.

Here are the results from last week’s poll.

A new poll coming on Friday!

Weirdest AI image of the day

Be very very quiet – r/weirddalle

ChatGPT’s random quote of the day

Thanks for reading, and don’t forget to leave comments and questions below,

Sam Volkering

Editor-in-Chief

AI Collision