Portfolio Manager Insights

AI’s role in gaming innovation is turning pixels into profits

Artificial intelligence is revolutionizing the video game industry, reshaping how games are developed, designed and experienced, says Fidelity’s Priyanshu Bakshi.

  • Artificial intelligence has considerably accelerated the development of video games, according to Fidelity Portfolio Manager Priyanshu Bakshi, enabling developers to create more dynamic, interactive and personalized gaming experiences and, by extension, yielding potential investment opportunities within the communication services sector.
  • “Imagine a world where video games evolve faster than ever, delivering deeply immersive experiences that feel almost lifelike,” says Bakshi, who manages Fidelity Advisor® Communication Services Fund. “The companies behind these innovations are driving substantial growth, not just in gaming, but also their bottom lines.”
  • In helming the equity sector strategy, Bakshi believes a company’s stock price generally aligns with its free cash flow and earnings. He focuses on firms showing profitable sales growth, which he views as a more enduring driver of earnings and cash flow.
  • One prominent example of a video game developer that meets Bakshi’s investment criteria is Roblox, a fund holding (as of December 31) that uses AI-driven end-to-end tools to empower creators to build immersive 3D worlds, moderate content, and even implement safety features like age verification.
  • This innovation is just one of the ways Roblox has integrated AI into its platform, attracting tens of millions of users, driving free-cash-flow generation and solidifying the firm’s position as a leader in the gaming industry, according to Bakshi.
  • He also likes Take-Two Interactive Software, another top-10 position, for its work in leveraging AI to redefine realism in gaming. “The company is setting new standards for immersive gameplay,” says Bakshi.
  • Specifically, he notes more-interactive and intelligent non-player characters in blockbuster game franchises, including Grand Theft Auto, as well as increasingly dynamic natural animation, environmental awareness and personalized dialogue that adapts to player actions.
  • Such AI-powered advancements have enhanced the player experience and driven profitable sales growth, a cornerstone of Bakshi’s investment philosophy.
  • He highlights that AI is amplifying the video game market at an exponential rate, with the number of users skyrocketing in the past 10 years, adding roughly a billion users in that time frame. Moreover, global gaming revenue is projected to be around $200 billion by 2025, according to Statista, creating what he considers an attractive long-term investment environment. 
  • "The intersection of AI and gaming is more than a technological marvel, it’s a powerful investment opportunity among video game makers," concludes Bakshi. “Furthermore, as the market continues to expand and AI capabilities evolve, I believe businesses at the forefront of this transformation may be poised to deliver outsized returns.”
Featured Fund

Fidelity Advisor Communication Services Fund (FGJMX)

Seeks to provide capital appreciation.