General Industry Update

In June, Nvidia CEO Jensen Huang speculated on the future of AI in video games, predicting a future in which generative AI profoundly transforms the landscape of video games, blending seamlessly with every aspect of gameplay. Speaking at the Computex tech expo in Taipei, Huang highlighted AI’s pivotal role in enhancing gaming experiences, from boosting frame rates and generating high-resolution graphics through technologies like DLSS, exclusive to Nvidia cards, to potentially creating AI-driven NPCs with lifelike dialogues and behaviours.

Huang envisions a future where AI not only improves graphical fidelity but also revolutionizes game dynamics, suggesting that AI-controlled teammates or opponents in multiplayer settings could mimic human-like strategies and evolve over time, akin to seasoned esports professionals. This integration aims not only to enrich gaming immersion but also to streamline game development processes, potentially easing the industry’s notorious production challenges.

Nvidia, already a dominant force in gaming hardware thanks to its high-end graphics cards, is also a key player in AI technology, essential for applications across various industries. The company’s strategic focus on deepening the synergy between AI and gaming reflects its ambition to further solidify its market leadership and capitalize on the burgeoning AI-driven innovation wave.¹

Also in June, a new report from industry watchers Niko Partners found that the gaming market across Asia, the Middle East, and North Africa (MENA) surged to $85.5 billion in 2023, marking a 4.6% annual increase. This growth trajectory is projected to continue, with expectations for the region to reach $97.1 billion by 2028.

Niko Partners’ study covers key markets such as China, India, Japan, Korea, Southeast Asia, and MENA countries. Notably, India emerges as a focal point for future expansion, forecasted to add a staggering 277 million gamers by 2028, surpassing even China in total gamer numbers.

The dominance of mobile gaming in the region is clear, with 58% of players spending on mobile games in 2023 and half on PC game expenditures. By 2028, the report anticipates two billion players in Asia and MENA, up from 1.6 billion in 2023, reflecting a positive demographic shift in gaming participation.

Key drivers of this growth include localized content, increasing engagement from female gamers, government endorsements of esports, and the evolution of monetization strategies beyond in-app purchases in mobile games.²

Company Specific Updates

Roblox Corp

Roblox Corporation is set to transform digital creation by integrating “4D generative AI” into its platform, allowing users to craft characters and objects that interact dynamically within virtual environments. This innovative approach aims to surpass traditional 3D modelling by incorporating the fourth dimension—interaction—thereby enabling more lifelike and responsive digital assets.

The company’s Chief Scientist, Morgan McGuire, outlined the ambitious goals for 4D generative AI in June, emphasizing its potential to revolutionize how users engage with digital content. Unlike static 3D objects, 4D generative AI will facilitate the creation of complex, interactive elements, such as vehicles with functional parts and avatars that seamlessly integrate with various accessories and environments.

Roblox’s existing suite of generative AI tools, which includes features like Animation Capture and Code Assist, has already enhanced the efficiency and creativity of over 77 million daily active users. The move towards 4D aims to build on this foundation, addressing challenges in functionality, interaction, and user control while pushing the boundaries of immersive digital experiences and solidifying its position at the forefront of interactive technology.³

Nexon Co

Nexon’s collaboration with Tencent Holdings Ltd. has yielded a staggering success with the launch of “Dungeon & Fighter Mobile,” which has surged past $270 million in revenue in its first 30 days on iOS. This achievement not only eclipses industry forecasts but also outshines the initial sales of China’s long-reigning gaming title, “Honor of Kings,” during a similar timeframe. Developed by Nexon, this blockbuster release also marks Tencent’s most significant debut of the year, showcasing Nexon’s pivotal role in rejuvenating Tencent’s gaming portfolio.

Anticipating strong market reception from early testing, Tencent expedited the game’s release, aiming to invigorate its domestic gaming division. Analysts now project “Dungeon & Fighter Mobile” will generate between 15 billion to 18 billion yuan ($2.1 billion to $2.6 billion) in gross revenue for 2024, potentially contributing up to 5% of Tencent’s total domestic game sales this year.

The game’s strategic marketing included high-profile partnerships with figures like Chinese actor Dilraba Dilmurat and innovative user incentives, such as cash rewards for recruiting friends via WeChat. Tencent also strategically bypassed traditional Android app stores like Huawei and Oppo, opting to distribute the game through its own platforms to mitigate hefty commission fees on in-game purchases.

For Nexon, the success of “Dungeon & Fighter Mobile” reaffirms its prowess in game development and cements its strategic partnership with Tencent as a cornerstone of future growth in the fiercely competitive global gaming market.⁴

HERO ETF: Diversified Investing in Gaming

Interested in a diversified approach to investing in video games? Canada’s first esports and gaming ETF, the Evolve E-Gaming Index ETF (HERO ETF), is an index-based exchange-traded fund that invests in the leading video game companies across the globe. To learn more about HERO ETF, please click here: https://evolveetfs.com/hero/.

Portfolio Strategy and Activity

For the month, Roblox Corp made the largest contribution to the Fund, followed by International Games System Co Ltd and Nexon Co Ltd. The largest detractors to performance for the month were Take-Two Interactive Software Inc, followed by Nintendo Co and Netmarble Corp.

 

Sources

  1. Landymore, F., “Nvidia CEO Says Video Games Will Be Totally Infused with AI,” Futurism, June 6, 2024; https://futurism.com/the-byte/nvidia-ceo-video-games-infused-ai
  2. McEvoy, S., “Asia and MENA games market expected to hit $100bn by 2028,” GamesIndustry.biz, June 6, 2024; https://www.gamesindustry.biz/asia-and-mena-games-market-expected-to-hit-100bn-by-2028
  3. McGuire, M., “Roblox’s Road to 4D Generative AI,” Roblox, June 17, 2024; https://corp.roblox.com/newsroom/2024/06/robloxs-road-to-4d-generative-ai
  4. Huang, Z. & Li, P., “Tencent’s New Blockbuster Game Exceeds $270 Million in 30 Days,” Bloomberg, June 24, 2024; https://www.bloomberg.com/news/articles/2024-06-24/tencent-s-new-game-doubles-honor-of-kings-sales-in-first-month

Header image source: Getty Images Credit: Deurimb

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Tags generative ai  HERO etf  nvidia  Roblox  video games