Artificial intelligence (AI) is hardly new to gaming. For years, developers have used it to control player behaviour, adapt opponents’ tactics and make virtual worlds feel responsive. What is new is generative AI, which moves beyond following pre-programmed rules to creating new dialogue and experiences in real time. The result is a shift from games that players simply explore to worlds that can evolve and respond alongside them, writes Rotem Farkash, AI entrepreneur and expert.

Analysts estimate the global AI in gaming market was worth around $US 4.54 billion in 2025, and is expected to reach US$81 billion by 2035, growing at more than 36% annually over the next decade. This makes it one of the fastest-growing segments of the games industry.

Much of the conversation has focused on development rather than gameplay. Creating a modern AAA title, the gaming industry’s term for a big-budget blockbuster release, is a huge undertaking. Many take five years or more to develop and involve hundreds of developers, costing well over US$100 million. AI is beginning to automate some of the most time-consuming tasks, from writing code and testing for bugs to generating animations and textures. Morgan Stanley estimates that AI could reduce game development costs by almost 50%, potentially unlocking $US22 billion in annual profits across the industry.

For players, however, the most exciting possibilities lie elsewhere.

Non-player characters (NPCs) have traditionally operated using scripted dialogue and predetermined behaviour. Once players exhaust their dialogue options, the illusion quickly fades. Large language models could fundamentally change that. Instead of selecting from a handful of responses, players may soon be able to hold natural conversations with characters that remember previous interactions and develop unique personalities over time.

Imagine going back to a village you visited months earlier, in-game, and the people there still remember what you did. That’s a different kind of world than the one games have offered so far.

Personalisation is moving in the same direction, just more quietly. Recommendation systems already analyse player behaviour to adjust difficulty and improve matchmaking. Rather than every player receiving the same experience, games can increasingly tailor themselves to individual play style. Developers in Japan, for example, report using AI primarily to analyse player behaviour and preferences rather than to generate creative content, suggesting that data-driven personalisation may become one of AI’s most significant contributions to gaming.

Yet AI’s rapid rise has also sparked fierce debate.

Many developers and artists worry that generative AI could devalue creative work by producing art, voice acting or writing using material trained on existing human creations. Others fear that studios may prioritize speed and cost savings over craftsmanship. Players have voiced similar concerns, questioning whether AI-generated worlds will ultimately feel less authentic than those painstakingly designed by people.

Recent evidence suggests those concerns cannot be ignored. While the number of games on Steam disclosing AI-generated content has risen sharply, studies indicate these titles generally underperform commercially compared with traditional releases, suffering up to 53% worse sales on Steam. AI may help developers create games more quickly, but it has yet to prove that it can create better ones.

That perhaps highlights the biggest misconception surrounding AI in gaming. The technology is often portrayed as a replacement for human creativity when, in reality, its greatest value may be as a collaborator.

Some of the industry’s most promising applications involve freeing developers from repetitive work so they can focus on storytelling and world-building. AI can generate a first draft of dialogue, identify bugs or populate a virtual city, but it still relies on human creativity to deliver memorable characters and meaningful experiences.

Gaming has evolved alongside technological innovation, from 3D graphics to online multiplayer and virtual reality. AI represents the next chapter in that evolution, but it is unlikely to succeed simply because it exists. Players rarely care about how a game was made. They care whether it is fun and worth coming back to.

Ultimately, the future of AI in gaming will not be defined by algorithms alone. It will be determined by how effectively developers use those tools to create experiences that still feel unmistakeably human.

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