Videogame stocks took a hit Thursday afternoon after Meta Platforms announced new artificial intelligence tools that can build mobile games. Gaming investors shouldn't be concerned just yet.
Meta announced during the second day of its Connect conference that it was launching two new tools-Horizon Create and Horizon Studio-that enable creators to turn ideas into complete 2-D and 3-D mobile games. Horizon Create and Studio users can describe the game they want to build in their own words, "and watch it come to life," according to a press release.
Horizon Create will be available on a smartphone while Horizon Studio is meant for a browser on a computer. Interested users can sign up for a wait list to be notified when early access to these tools will be available.
The news spooked videogame investors. Shares of Take-Two Interactive Software fell 1.6% to $202.98, Unity Software dropped 6.1% to $41.42, and Roblox declined 0.3% to $48.83 after Meta announced its Horizon game tools.
"There's an underlying worry that AI can really simplify the game creation process to the point where the competitive moat that the incumbents enjoy right now erodes over time," Nick McKay, videogaming and digital entertainment analyst at Freedom Capital Markets, told Barron's.
Take-Two declined to respond to a Barron's request for comment while Unity and Roblox didn't immediately respond to a request for comment.
This isn't the first time news of an AI powered game builder from a tech giant worried videogame investors. All of those stocks took a tumble on Jan. 30 after Alphabet announced the availability of Project Genie, an AI-based tool that can give users the ability to create fully rendered three-dimensional worlds.
Management from these companies has pushed back on the idea that AI developments in the videogame creation space pose a risk. Take-Two President Karl Slatoff said in February that he couldn't compare Genie to a videogame builder because "they're not even in the same ballpark. Genie is not a game engine."
McKay also says that it's not yet clear what Horizon will be able to do when it becomes available.
"The main thing I keep in mind is when they're showing videos like these, it's always in a controlled environment and obviously, there's no ability for an outsider to actually test this service," he said.
It will also likely be a very long time, if ever, that a tool like Horizon will pose any real threat to a massive gaming studio like Take-Two, which publishes some of the most popular games of all time. Grand Theft Auto VI is scheduled to come out in November after being in development for years. These studios have massive teams that work hard on story lines, world building, mechanics, and all the other components that make videogames so special to their fans.
A company like Unity, which provides the software used to create games, would be more at risk. But even that threat seems far away.
"My bias would be that over the short term the reactions tend to be overdone, and you can see that with how Unity share price has been able to bounce back over time from what happened in January with Genie 3," McKay said. "But is it overdone over the long term? None of us know."
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