Can AI Make Video Games More Immersive? Some Studios Turn to AI-Fueled NPCs for More Interaction

The AI (Artificial Intelligence) letters and robot hand are placed on computer motherboard in this illustration taken, June 23, 2023. (Reuters)
The AI (Artificial Intelligence) letters and robot hand are placed on computer motherboard in this illustration taken, June 23, 2023. (Reuters)
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Can AI Make Video Games More Immersive? Some Studios Turn to AI-Fueled NPCs for More Interaction

The AI (Artificial Intelligence) letters and robot hand are placed on computer motherboard in this illustration taken, June 23, 2023. (Reuters)
The AI (Artificial Intelligence) letters and robot hand are placed on computer motherboard in this illustration taken, June 23, 2023. (Reuters)

For decades, video games have relied on scripted, stilted interactions with non-player characters to help shepherd gamers in their journeys. But as artificial intelligence technology improves, game studios are experimenting with generative AI to help build environments, assist game writers in crafting NPC dialogue and lend video games the improvisational spontaneity once reserved for table-top role-playing games.

In the multiplayer game “Retail Mage,” players help run a magical furniture store and assist customers in hopes of earning a five-star review. As a salesperson — and wizard — they can pick up and examine items or tell the system what they'd like to do with a product, such as deconstruct chairs for parts or tear a page from a book to write a note to a shopper.

A player’s interactions with the shop and NPCs around them — from gameplay mechanics to content and dialogue creation — are fueled by AI rather than a predetermined script to create more options for chatting and using objects in the shop.

“We believe generative AI can unlock a new kind of gameplay where the world is more responsive and more able to meet players at their creativity and the things that they come up with and the stories they want to tell inside a fantasy setting that we create for them,” said Michael Yichao, cofounder of Jam & Tea Studios, which created “Retail Mage.”

The typical NPC experience often leaves something to be desired. Pre-scripted interactions with someone meant to pass along a quest typically come with a handful of chatting options that lead to the same conclusion: players get the information they need and continue on. Game developers and AI companies say that by using generative AI tech, they aim to create a richer experience that allows for more nuanced relationships with the people and worlds that designers build.

Generative AI could also provide more opportunities for players to go off-script and create their own stories if designers can craft environments that feel more alive and can react to players' choices in real-time.

Tech companies continue to develop AI for games, even as developers debate how, and whether, they’ll use AI in their products. Nvidia created its ACE technologies to bring so-called “digital humans” to life with generative AI. Inworld AI provides developers with a platform for generative NPC behavior and dialogue. Gaming company Ubisoft said last year that it uses Ghostwriter, an in-house AI tool, to help write some NPC dialogue without replacing the video game writer.

A report released by the Game Developers Conference in January found that nearly half of developers surveyed said generative AI tools are currently being used in their workplace, with 31% saying they personally use those tools. Developers at indie studios were most likely to use generative AI, with 37% reporting using the tech.

Still, roughly four out of five developers said they worry about the ethical use of AI. Carl Kwoh, Jam & Tea's CEO, said AI should be used responsibly alongside creators to elevate stories — not to replace them.

“That’s always been the goal: How can we use this tool to create an experience that makes players more connected to each other?” said Kwoh, who is also one of the company’s founders. “They can tell stories that they couldn’t tell before.”

Using AI to provide NPCs with endless things to say is “definitely a perk,” Yichao said, but "content without meaning is just endless noise." That's why Jam & Tea uses AI — through Google's Gemma 2 and their own servers in Amazon — to give NPCs the ability to do more than respond, he said. They can look for objects as they’re shopping or respond to other NPCs to add “more life and reactivity than a typically scripted encounter.”

“I’ve watched players turn our shopping experience into a bit of a dating sim as they flirt with customers and then NPCs come up with very realistic responses,” he said. “It’s been really fun to see the game react dynamically to what players bring to the table.”

Demonstrating a conversation with an NPC in the game “Mecha BREAK,” in which players battle war machines, Ike Nnole said that Nvidia has made its AI “humans” respond faster than they previously could by using small language models. Using Nvidia's AI, players can interact with the mechanic, Martel, by asking her to do things like customize the color of a mech machine.

“Typically, a gamer would go through menus to do all this,” Nnole, a senior product marketing manager at Nvidia said. “Now it could be a much more interactive, much quicker experience.”

Artificial Agency, a Canadian AI company, built an engine that allows developers to bring AI into any part of their game — not only NPCs, but also companions and “overseer agents” that can steer a player towards content they’re missing. The AI can also create tutorials to teach players a skill that they are missing so they can have more fun in-game, the company said.

“One way we like to put it is putting a game designer on the shoulder of everyone as they’re playing the game,” said Alex Kearney, cofounder of Artificial Agency. The company’s AI engine can be integrated at any stage of the game development cycle, she said.

Brian Tanner, Artificial Agency's CEO, said scripting every possible outcome of a game can be tedious and difficult to test. Their system allows designers to act more like directors, he said, by telling characters more about their motivation and background.

"These characters can improvise on the spot depending on what’s actually happening in the game,” Tanner said.

It's easy to run into a game's guardrails, Tanner said, where NPCs keep repeating the same phrase regardless of how players interact with them. But as AI continues to evolve, that will change, he added.

“It is truly going to feel like the world’s alive and like everything really reacts to exactly what’s happening," he said. “That’s going to add tremendous realism.”



Nintendo Hikes Switch 2 Annual Unit Sales Target

While Nintendo is diversifying into hit movies and theme parks, consoles remain at the core of its business. GREG BAKER / AFP
While Nintendo is diversifying into hit movies and theme parks, consoles remain at the core of its business. GREG BAKER / AFP
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Nintendo Hikes Switch 2 Annual Unit Sales Target

While Nintendo is diversifying into hit movies and theme parks, consoles remain at the core of its business. GREG BAKER / AFP
While Nintendo is diversifying into hit movies and theme parks, consoles remain at the core of its business. GREG BAKER / AFP

Nintendo said Tuesday it aims to sell 19 million Switch 2 consoles within this financial year, up from its previous target 15 million for the smash-hit gadget.

The Switch 2 became the world's fastest-selling games console after launching in June to a frenzy of excitement from fans of "Super Mario" and other top titles, said AFP.

"The hardware has seen strong sales since its launch," Nintendo said as it raised its annual net profit forecast to 350 billion yen ($2.3 billion) from 300 billion yen.

Sales of the games "Mario Kart World" and "Donkey Kong Bananza" are growing steadily, the Japanese company said.

"We will aim to keep the momentum of released titles and continuously introduce new titles to expand the platform's user base," it added.

While Nintendo is diversifying into hit movies and theme parks, consoles remain at the core of its business.

The original Switch soared in popularity during the pandemic with games such as "Animal Crossing" striking a chord during long lockdowns worldwide.

The Switch 1 has sold 154 million units since its 2017 release, making it the third best-selling console of all time after Sony's PlayStation 2 and the Nintendo DS.

Nintendo said Tuesday it sold more than 10 million Switch 2 consoles in the first half of 2025-26.

For the April to September period the company logged net profit of nearly 200 billion yen, up 83 percent year-on-year, forecasting record annual sales of 2.25 trillion yen.

"The Switch 2's demand will likely remain high, especially as the console ramps up sales in non-traditional markets such as China," said Darang Candra, director for East Asia and Southeast Asia research at Niko Partners.

"We remain cautious, however, about whether Switch 2 can replicate Switch 1's 150-million-unit sales," he told AFP ahead of Tuesday's earnings release.

"Switch 2's long-term success will depend on Nintendo's ability to sustain engagement with new titles and also penetrate emerging markets" such as in the Middle East and Asian countries apart from Japan, Candra added.

Nintendo in September marked 40 years since the first "Super Mario Bros." game -- a colorful world of platforms, pipes and scowling enemies -- was released.

Market analysts at Jefferies noted that Nintendo's brand was about to receive a "significant boost" when the red-capped Mario character features as a balloon in the Macy's Thanksgiving Parade in New York City this year for the first time.

The sequel to the megahit "Super Mario Bros. Movie" is also scheduled for release in April 2026.


OpenAI, Amazon Strike $38 billion Agreement for ChatGPT Maker to Use AWS

The ChatGPT app icon on a smartphone in this illustration taken October 27, 2025. REUTERS/Dado Ruvic/Illustration
The ChatGPT app icon on a smartphone in this illustration taken October 27, 2025. REUTERS/Dado Ruvic/Illustration
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OpenAI, Amazon Strike $38 billion Agreement for ChatGPT Maker to Use AWS

The ChatGPT app icon on a smartphone in this illustration taken October 27, 2025. REUTERS/Dado Ruvic/Illustration
The ChatGPT app icon on a smartphone in this illustration taken October 27, 2025. REUTERS/Dado Ruvic/Illustration

Amazon.com will supply OpenAI with cloud computing services under a multi-year $38 billion deal, giving the ChatGPT maker access to hundreds of thousands of Nvidia graphics processors to train and run its artificial intelligence models.

The agreement announced on Monday underscores the AI industry's surging appetite for computing power, driven by the pursuit of technology capable of matching or surpassing human intelligence. It sent Amazon shares up 5% in premarket trading.

OpenAI will begin using Amazon Web Services immediately, with all planned capacity set to come online by the end of 2026 and room to expand further in 2027 and beyond, Reuters reported.

The deal is among the first major moves by OpenAI since it completed a restructuring last week that frees the ChatGPT maker to move away from its nonprofit roots. Reuters has reported it was laying the groundwork for an initial public offering that could value the company at up to $1 trillion.

But surging valuations of AI companies and their massive spending commitments, which total more than $1 trillion for OpenAI, have raised fears that the AI boom is inflating into a bubble.


Microsoft Signs $9.7 Billion Contract with IREN for Nvidia Chips

A Microsoft logo is seen on an office building in New York City in this July 28, 2015 file photo. REUTERS/Mike Segar//File Photo
A Microsoft logo is seen on an office building in New York City in this July 28, 2015 file photo. REUTERS/Mike Segar//File Photo
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Microsoft Signs $9.7 Billion Contract with IREN for Nvidia Chips

A Microsoft logo is seen on an office building in New York City in this July 28, 2015 file photo. REUTERS/Mike Segar//File Photo
A Microsoft logo is seen on an office building in New York City in this July 28, 2015 file photo. REUTERS/Mike Segar//File Photo

Data center owner and operator IREN said on Monday it has signed a nearly $9.7 billion cloud services contract with Microsoft to provide the tech giant with access to Nvidia's GB300 processors over a five-year period.

The move is the latest attempt by Microsoft to boost AI and data center infrastructure at a time when AI demand is outstripping cloud capacity at Big Tech companies.

Shares of IREN surged about 18% in premarket trading after the announcement, with the company also entering into an agreement with Dell Technologies to purchase the chips and ancillary equipment for about $5.8 billion.

IREN expects the GB300 processors to be deployed in phases through 2026 at its 750-megawatt campus in Childress, Texas and said its contract with Microsoft includes a 20% prepayment.