China Merchants Securities released a research report stating that the rapid growth of short-form video platforms is impacting the average time spent per user in the gaming industry. The development speed of new games appears slow and passive compared to the frequent updates of short-form videos, which can see hundreds of thousands or even millions of updates daily. However, with the advancement of AI technology, game development and iteration are expected to accelerate, potentially expanding the overall market size of the gaming industry.
Looking ahead to the AI era, as game updates and iterations become faster, major game titles are likely to become increasingly comprehensive and significant. This trend may further limit the market space for new AI-driven games, while traditional gaming leaders could see their competitive position strengthened. The report reiterates a firm positive outlook on leading game companies such as Century Huatong (002602.SZ), Giant Network (002558.SZ), and Kingnet Network (002517.SZ).
Key viewpoints from China Merchants Securities are as follows:
The gaming industry is expected to recapture some user time from short-form videos in the AI era. The gaming sector itself is not highly competitive internally, with various game genres and individual titles maintaining stable, long-term user bases. However, since the emergence of short-form video platforms, the gaming industry has faced significant challenges. According to QM data, the penetration rate of short-form videos across the internet reached 91.2% by December 2025, with average monthly usage per user at 65.5 hours. The rapid expansion of short-form video has substantially reduced the average time spent on games. A primary reason for gaming's slower growth compared to short-form video is the slower update cycles for existing games and the relatively slow pace of new game development. With AI technology, game development and updates are set to speed up, potentially increasing the industry's overall market potential.
In the AI era, leading game companies will focus more on IP operations, game publishing, advertising, and overall game design. Gaming leaders are expected to concentrate further on their core businesses, emphasizing IP management, game distribution, user acquisition, and holistic game design. Tasks such as large-scale game production, operation, and customer service can be handled through AI or outsourcing, making leading companies more asset-light. Concerns that individual developers or small teams might disrupt established leaders in the AI era are unfounded, as IP management, game publishing, and overall design cannot be fully replaced by AI. These areas require substantial financial resources, existing IP, industry experience, and creative planning. Instead, many small teams developing AI-based games are likely to collaborate with major game companies to avoid being overshadowed in a saturated market.
In the AI era, major game titles will become more comprehensive, attracting more players. China Merchants Securities predicts that as game updates and iterations accelerate, disrupting the existing industry landscape with one or two new games or gameplay innovations will be highly challenging. On the contrary, well-established major games will quickly learn from and incorporate recent trends and new gameplay mechanics, making them more comprehensive and robust. This will further constrain the market space for new AI-driven games, thereby enhancing the position of traditional gaming leaders.
The report maintains a strong positive view on leading game companies, including Century Huatong (002602.SZ), Giant Network (002558.SZ), Kingnet Network (002517.SZ), 37 Interactive Entertainment (002555.SZ), Perfect World (002624.SZ), XD INC (02400), Shunwang Technology (300113.SZ), Shengtian Network (300494.SZ),神州泰岳 (300002.SZ), and Tanwan (09890).
Risks include potential underperformance of game revenue and increased competition from new products by giants such as Tencent and NetEase.
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