Morgan Stanley highlights AI's potential to transform game development
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Aug 18 2025
0mins
Should l Buy TTWO?
Source: CNBC
Take-Two Interactive Software Inc's stock fell 5.00% as it crossed below the 5-day SMA amid broader market declines.
Morgan Stanley analysts reported that advanced AI tools could reduce video game development costs by nearly half, potentially unlocking about $22 billion in annual profits for game makers. This shift could significantly enhance industry profitability, although companies lacking proprietary data may struggle amid increasing competition.
The implications of these advancements suggest that while Take-Two may face challenges, the overall industry could benefit from improved efficiency and profitability through AI integration.
Trade with 70% Backtested Accuracy
Stop guessing "Should I Buy TTWO?" and start using high-conviction signals backed by rigorous historical data.
Sign up today to access powerful investing tools and make smarter, data-driven decisions.
Analyst Views on TTWO
Wall Street analysts forecast TTWO stock price to rise
14 Analyst Rating
14 Buy
0 Hold
0 Sell
Strong Buy
Current: 223.500
Low
270.00
Averages
286.77
High
300.00
Current: 223.500
Low
270.00
Averages
286.77
High
300.00
About TTWO
Take-Two Interactive Software, Inc. is a developer, publisher, and marketer of interactive entertainment for consumers around the globe. The Company develops and publishes products principally through Rockstar Games, 2K, and Zynga. Its products are designed for console gaming systems, including, but not limited to, the Sony Computer Entertainment, Inc. (Sony) PlayStation4 (PS4) and PlayStation5 (PS5), the Microsoft Corporation (Microsoft) Xbox One (Xbox One) and Xbox Series XS (Xbox Series XS), and the Nintendo Switch (Switch), as well as mobile, including smartphones and tablets, and personal computers (PC). It delivers its products through physical retail, digital download, online platforms, and cloud streaming services. It sells software titles both digitally and physically through direct relationships with digital storefronts and platform partners, large retail customers, and third-party distributors. It also sells advertising within a number of its games, primarily in mobile.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Nintendo and Sony Impacted by Soaring Memory Prices
- Surging Memory Prices: The demand from AI data centers has caused memory chip prices to double in Q1 and is forecasted to rise by 63% in the current quarter, significantly impacting the gaming businesses of both Nintendo and Sony.
- Nintendo's Cost Increase: Nintendo anticipates an increase of approximately 100 billion yen ($638 million) in costs this financial year due to rising component costs, particularly memory, and tariffs, prompting a price hike for the Switch 2.
- Sony's Price Adjustment: Sony announced a $100 increase in the PS5 standard version price to $649.99, and while it expects lower sales, profits in its gaming business are projected to rise, indicating resilience amid high memory costs.
- Market Response and Risks: Nintendo faces increased pressure to release more first-party blockbusters to boost demand, with expectations of selling 16.5 million Switch 2 units this year, down from 19.9 million last year, highlighting the risks associated with price sensitivity in the market.
See More
Hedgeye Initiates Long Position on Take-Two Interactive Amid GTA VI Anticipation
- Pre-Order Window: Pre-orders for GTA VI are expected to open in late June or over the summer, providing the market with its first hard datapoint on demand intensity, average selling price, and edition mix, which could trigger a stock re-rating in the 4-6 months leading up to release, suggesting investors should act before November.
- Market Expectations: Hedgeye analyst Andrew Freedman notes that the scale and scope of GTA VI will likely surpass previous franchise entries, with expanded monetization opportunities and content strategies that could fundamentally reshape Take-Two's revenue profile for years to come.
- Competitive Analysis: Freedman dismisses Google's Genie 3 model as a competitive threat, arguing that it cannot substitute the narrative depth, brand equity, and decades of accumulated IP value inherent in franchises like Grand Theft Auto, and that AI tools may actually lower development costs and accelerate content production.
- Investor Focus: As the release of GTA VI approaches, Take-Two's stock price may experience positive momentum, prompting investors to pay close attention to upcoming pre-order data to capitalize on potential market opportunities.
See More
Bank of America Predicts GTA 6 Pricing at $80, Boosts TTWO Target to $320
- Pricing Expectations: Bank of America predicts that Grand Theft Auto 6 will be priced at $80, notably higher than the previously assumed $70 level, which could influence pricing strategies across the gaming industry.
- Industry Impact Analysis: Although executives from Take-Two Interactive did not explicitly endorse the $80 price tag, they noted that video game prices have fallen over time when adjusted for inflation, indicating that the company may price GTA 6 according to the value it delivers to consumers.
- Target Price Increase: Based on the new pricing forecast, BofA raised its price target for Take-Two Interactive to $320, which corresponds to 26 times the blended EPS estimate for 2027-2028, reflecting strong market confidence in the company.
- Game Release Outlook: Grand Theft Auto 6 is expected to launch ahead of the 2026 holiday season, set in the fictional state of Leonida and featuring areas inspired by Florida, suggesting a larger and more immersive gaming experience.
See More
Roblox Shares Plunge 24% After Lowering Annual Bookings Forecast
- Bookings Forecast Cut: Roblox has lowered its full-year bookings forecast to $7.33 billion to $7.6 billion from the previous $8.28 billion to $8.55 billion, indicating a pessimistic outlook on future revenues that may erode investor confidence.
- User Growth Constraints: The newly implemented safety measures, including age-based accounts and content monitoring, have restricted user communication and slowed new user acquisition, potentially causing continued short-term friction in user growth over the next few quarters, impacting the platform's long-term development.
- Market Valuation Loss: If current losses persist, Roblox could lose over $9 billion from its market valuation of $39.55 billion, reflecting market concerns about its future growth potential, especially amid increasing competition.
- Increased Competitive Pressure: Analysts have noted that the forecast cut likely reflects competitive pressures from Fortnite and the upcoming release of Take-Two Interactive's Grand Theft Auto VI, which is expected to drive billions in revenue and could further weaken Roblox's bookings growth.
See More
GTA 6 Set for November 2026 Release
- Release Date Confirmation: Take-Two Interactive's GTA 6 is set to launch on November 19, 2026, with CEO Strauss Zelnick reaffirming this date during an interview, although he did not disclose success metrics or pricing, indicating confidence in the title's potential.
- Expanded Game World: The game will be set in the fictional state of Leonida, featuring areas inspired by Florida's Everglades and Keys, which is expected to provide a larger and more immersive experience, enhancing player engagement and interest.
- Modernized Systems: GTA 6 will introduce updated systems for police behavior, stealth, combat, and world simulation, aiming to increase realism and interactivity, thereby attracting more players and strengthening market competitiveness.
- Coexistence of Online Services: Zelnick indicated that GTA Online will coexist with GTA 6, potentially providing additional revenue streams for Take-Two, reflecting the company's strategy to balance new and existing titles to meet player demands and enhance profitability.
See More
AI Tools Could Halve Game Development Costs
- Cost Reduction Potential: Morgan Stanley analysts indicate that advanced AI tools could reduce video game development costs by nearly half, potentially unlocking about $22 billion in annual profits for game makers worldwide, significantly enhancing industry profitability.
- Efficiency Gains: By automating tasks such as creating gaming environments, generating dialogue, and testing software, AI tools can shorten production timelines and reduce costs, thereby improving margins over time and transforming traditional game development practices.
- Market Scale and Investment: Global consumer spending on video games is projected to reach $275 billion in 2023, with approximately 20% (around $55 billion) earmarked for reinvestment in game development and operations, reflecting the industry's commitment to new technologies and investment willingness.
- Changing Competitive Landscape: Morgan Stanley notes that companies with proprietary data, IP, and live operations will be key beneficiaries, while weaker game companies may face greater pressure, as the proliferation of AI intensifies competition in the mid-scale game market.
See More
Nintendo and Sony Impacted by Soaring Memory Prices
- Surging Memory Prices: The demand from AI data centers has caused memory chip prices to double in Q1 and is forecasted to rise by 63% in the current quarter, significantly impacting the gaming businesses of both Nintendo and Sony.
- Nintendo's Cost Increase: Nintendo anticipates an increase of approximately 100 billion yen ($638 million) in costs this financial year due to rising component costs, particularly memory, and tariffs, prompting a price hike for the Switch 2.
- Sony's Price Adjustment: Sony announced a $100 increase in the PS5 standard version price to $649.99, and while it expects lower sales, profits in its gaming business are projected to rise, indicating resilience amid high memory costs.
- Market Response and Risks: Nintendo faces increased pressure to release more first-party blockbusters to boost demand, with expectations of selling 16.5 million Switch 2 units this year, down from 19.9 million last year, highlighting the risks associated with price sensitivity in the market.
See More
Hedgeye Initiates Long Position on Take-Two Interactive Amid GTA VI Anticipation
- Pre-Order Window: Pre-orders for GTA VI are expected to open in late June or over the summer, providing the market with its first hard datapoint on demand intensity, average selling price, and edition mix, which could trigger a stock re-rating in the 4-6 months leading up to release, suggesting investors should act before November.
- Market Expectations: Hedgeye analyst Andrew Freedman notes that the scale and scope of GTA VI will likely surpass previous franchise entries, with expanded monetization opportunities and content strategies that could fundamentally reshape Take-Two's revenue profile for years to come.
- Competitive Analysis: Freedman dismisses Google's Genie 3 model as a competitive threat, arguing that it cannot substitute the narrative depth, brand equity, and decades of accumulated IP value inherent in franchises like Grand Theft Auto, and that AI tools may actually lower development costs and accelerate content production.
- Investor Focus: As the release of GTA VI approaches, Take-Two's stock price may experience positive momentum, prompting investors to pay close attention to upcoming pre-order data to capitalize on potential market opportunities.
See More
Bank of America Predicts GTA 6 Pricing at $80, Boosts TTWO Target to $320
- Pricing Expectations: Bank of America predicts that Grand Theft Auto 6 will be priced at $80, notably higher than the previously assumed $70 level, which could influence pricing strategies across the gaming industry.
- Industry Impact Analysis: Although executives from Take-Two Interactive did not explicitly endorse the $80 price tag, they noted that video game prices have fallen over time when adjusted for inflation, indicating that the company may price GTA 6 according to the value it delivers to consumers.
- Target Price Increase: Based on the new pricing forecast, BofA raised its price target for Take-Two Interactive to $320, which corresponds to 26 times the blended EPS estimate for 2027-2028, reflecting strong market confidence in the company.
- Game Release Outlook: Grand Theft Auto 6 is expected to launch ahead of the 2026 holiday season, set in the fictional state of Leonida and featuring areas inspired by Florida, suggesting a larger and more immersive gaming experience.
See More
Roblox Shares Plunge 24% After Lowering Annual Bookings Forecast
- Bookings Forecast Cut: Roblox has lowered its full-year bookings forecast to $7.33 billion to $7.6 billion from the previous $8.28 billion to $8.55 billion, indicating a pessimistic outlook on future revenues that may erode investor confidence.
- User Growth Constraints: The newly implemented safety measures, including age-based accounts and content monitoring, have restricted user communication and slowed new user acquisition, potentially causing continued short-term friction in user growth over the next few quarters, impacting the platform's long-term development.
- Market Valuation Loss: If current losses persist, Roblox could lose over $9 billion from its market valuation of $39.55 billion, reflecting market concerns about its future growth potential, especially amid increasing competition.
- Increased Competitive Pressure: Analysts have noted that the forecast cut likely reflects competitive pressures from Fortnite and the upcoming release of Take-Two Interactive's Grand Theft Auto VI, which is expected to drive billions in revenue and could further weaken Roblox's bookings growth.
See More
GTA 6 Set for November 2026 Release
- Release Date Confirmation: Take-Two Interactive's GTA 6 is set to launch on November 19, 2026, with CEO Strauss Zelnick reaffirming this date during an interview, although he did not disclose success metrics or pricing, indicating confidence in the title's potential.
- Expanded Game World: The game will be set in the fictional state of Leonida, featuring areas inspired by Florida's Everglades and Keys, which is expected to provide a larger and more immersive experience, enhancing player engagement and interest.
- Modernized Systems: GTA 6 will introduce updated systems for police behavior, stealth, combat, and world simulation, aiming to increase realism and interactivity, thereby attracting more players and strengthening market competitiveness.
- Coexistence of Online Services: Zelnick indicated that GTA Online will coexist with GTA 6, potentially providing additional revenue streams for Take-Two, reflecting the company's strategy to balance new and existing titles to meet player demands and enhance profitability.
See More
AI Tools Could Halve Game Development Costs
- Cost Reduction Potential: Morgan Stanley analysts indicate that advanced AI tools could reduce video game development costs by nearly half, potentially unlocking about $22 billion in annual profits for game makers worldwide, significantly enhancing industry profitability.
- Efficiency Gains: By automating tasks such as creating gaming environments, generating dialogue, and testing software, AI tools can shorten production timelines and reduce costs, thereby improving margins over time and transforming traditional game development practices.
- Market Scale and Investment: Global consumer spending on video games is projected to reach $275 billion in 2023, with approximately 20% (around $55 billion) earmarked for reinvestment in game development and operations, reflecting the industry's commitment to new technologies and investment willingness.
- Changing Competitive Landscape: Morgan Stanley notes that companies with proprietary data, IP, and live operations will be key beneficiaries, while weaker game companies may face greater pressure, as the proliferation of AI intensifies competition in the mid-scale game market.
See More
