AI is transforming gaming as we move into next-gen worlds. Picture via Getty Images
Next-gen AI video games are here to stay, and these stocks are leading the ASX charge
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- AI transforms gaming as we move into next-gen worlds
- Microsoft Muse could change the future of game creation
- Fatfish, iCandy, Arsitocrat, and PlaySide Studios step up
We’ve come a long way since the days of the simple, predictable enemies featured in Space Invaders and Pac-Man.
Back then, video games were just a set of basic patterns. Enemies followed the same moves every time, and that’s all they needed to do to create excitement.
But fast forward through decades of gaming developments to now – when Artificial Intelligence (AI), or what’s also known as Procedural Content Generation, has become the backbone of next-gen gaming.
Games have come a long way from their relatively linear loops, and AI-powered games are keeping players on their toes more than ever before, with every encounter feeling realistic, fresh and unpredictable.
And with AI, non-playable characters (NPCs) aren’t just background fillers any more.
They’re alive and constantly adjusting to your every move, throwing unexpected challenges your way, never letting you relax for a second.
They act like real players, learning and reacting, making sure that no matter how many times you play, it never feels the same.
In Detroit: Become Human, for example, you step into a futuristic world where advanced AI has been integrated into everyday life.
In this game, originally released in 2018 but updated in late 2023, the characters Kara, Markus and Connor, are “androids” designed to serve humans by performing tasks ranging from household chores to dangerous assignments.
It gets very realistic as these androids begin to gain self-awareness, develop emotions and start questioning their roles as mere tools.
And there are other head-turning games, such as No Man’s Sky.
This was also released back in 2018, but this year it’s made a resurgence, coming back fully transformed by insane AI-driven worlds, with landscapes, quests and ecosystems that feel like they’re evolving as you play.
Microsoft’s recent AI launch could reshape the sector
The big tech giants recognise the vast potential in the emerging AI gaming space.
Last week, Microsoft created excitement among game developers after unveiling its new AI tool, Muse, which experts believe could completely change how games are made.
Muse is a new AI model that helps create parts of video games by generating environments and gameplay based on visuals or player actions.
It can respond in real-time to how players interact with the game, enabling developers to speed up creation.
According to the latest stats from S&P, the AI gaming market is projected to grow massively to between US$154.3 billion and US$280 billion by 2032-33.
Which players are emerging in this space?
So, the question for investors is… are there any opportunities to gain some exposure to this space through the ASX?
As you would’ve gathered by now, the answer is yes.
One company gaining traction in AI gaming is global player Aristocrat Leisure (ASX:ALL).
Perhaps more known for its slot machines, the company has filed a patent that uses AI to simulate multiplayer games with bots that mimic player behaviour. The bots’ behaviour can be updated based on player interactions.
Meanwhile, in the smaller end of town, Fatfish Group (ASX:FFG) is also emerging as a dynamic force in the scene.
In May 2024, Fatfish picked up a stake in AI Gaming Co (AIGC), a company that uses AI to develop games.
AIGC’s first game, Tatarot, blends AI with traditional tarot readings, offering players personalised, AI-generated art for a unique, gamified experience.
Its next game, The Waifu Maker, uses Generative AI to create virtual girlfriend experiences based on Neo-Tokyo-style art.
On top of that, Fatfish is jumping into social gaming with its new platform, hibur.io, launched in April last year.
Social gaming is basically any game where you’re interacting with other people, either by competing, teaming up, or just sharing your progress.
Recently, games on platforms such as Telegram have taken off, letting players earn rewards and connect with others, all while using a messaging app.
The market for this is expected to grow to US$36 billion by 2027, according to Fatfish.
Fatfish is also working on a Telegram-based gaming platform that could offer game developers an easy way to reach players, as well as backing blockchain projects like Minerium, a blockchain mining technology firm.
The company raised $1.5 million in a placement in November, easily surpassing the initial $1 million target.
“We are pleased to have seen robust support from the market as we look to accelerate investments we are making into frontier technologies – including blockchain mining, social and digital gaming, as well as artificial intelligence,” said Fatfish’s CEO, Kin Wai Lau.
Other AI video gaming players on the ASX
PlaySide Studios is Australia’s largest video game developer and publisher.
Based in Port Melbourne, PlaySide was founded in 2011 and has since grown into a powerhouse with a portfolio of around 60 proprietary titles.
With a focus on mobile, PC/console, and virtual reality games, the company collaborates with big names including Activision Blizzard, Meta, Netflix Games, and Take-Two Interactive.
The company also publishes games from smaller, independent studios.
PlaySide’s original intellectual property and early success was driven by popular franchises like Dumb Ways To Die, and Kill Knight.
The success of Kill Knight was particularly notable, as it marked PlaySide’s first simultaneous release on PC, PlayStation, Xbox, and Nintendo Switch.
More recently, one of its standout projects is Sid Meier’s Civilization VII – VR.
Developed by PlaySide and published by 2K Games, this game marks the iconic Civilization franchise’s first venture into virtual and mixed reality.
Over the last few years, the company has seen revenue grow by an impressive 70% annually, with revenue hitting $64.6 million in FY24.
iCandy is also one of the largest game developers listed on the ASX, with over 700 full-time professionals across six studios in five countries.
The company is known for its impressive portfolio in both traditional and web3 gaming, having worked on over 150 AAA titles including Spider-Man, Call of Duty, and Tekken 7.
This makes iCandy a key player in the gaming industry, bringing game development, animation and even metaverse building to the table.
Earlier this year, iCandy took a big step forward with its web3 venture, ZKCandy, raising US$4 million in seed funding.
This investment round was backed by major web3 institutional players, including Animoca Ventures, Wemix and Spartan Group.
ZKCandy is developing a layer 2 Ethereum solution focused on web3 gaming, with an innovative twist: integrating EVM-compatible games into the Telegram platform.
Early results are promising, with over 2.4 million wallets created during ZKCandy’s open-testnet phase, suggesting that it’s got the potential to reach a wide audience.
While web3 gaming has cooled down recently along with the broader crypto market, iCandy is still strategically positioning itself to bridge the gap between traditional gaming and blockchain tech.
Its joint venture with Matter Labs in ZKCandy focuses on making web3 gaming more accessible, with tools and infrastructure designed to support both players and developers.
With more than 25 game titles in the pipeline, ZKCandy said it’s gearing up for its mainnet launch in mid-2025 and aims to continue expanding its presence in the space.
This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decision.
At Stockhead we tell it like it is. While Fatfish and iCandy are Stockhead advertisers, they did not sponsor this article.
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