Unity Software shares suffered a sharp decline on Friday, closing down 24.2% at $29.10 . During the session, the stock fluctuated between a high of $38.40 and a low of $27.64 , with a trading volume of approximately 86.9 million shares , well above its usual average.
What caused Unity to crash?
The drop occurred after Alphabet (Google) unveiled Project Genie , an artificial intelligence model capable of generating interactive digital worlds from simple text prompts . According to Google, its new Genie 3 model can generate the environment in real time as the user moves around, simulating physics and basic interactions.
For many investors, the news raised concerns about the future of traditional game engines , such as Unity or Unreal Engine, given the possibility that prompt-based tools could reduce the need for complex and expensive software.
“AI-powered systems could begin to create experiences that not only accelerate human work, but are unique in themselves,” said Joost van Dreunen, a professor at NYU Stern School of Business.
What is Project Genie and what can it do today?
Google clarified that Project Genie is, for now, an experimental prototype available through Google Labs for users in the United States subscribed to the AI Ultra plan .
Current limitations of Project Genie
- Generates interactive clips of approximately 60 seconds .
- It does not include sound or defined game objectives.
- It does not allow direct export of created worlds to Unity or Unreal Engine.
- It has been trained primarily using publicly available data from the web .
These restrictions have led several experts to point out that technology is still far from replacing the professional workflows of video game studios.
The impact on other stocks in the gaming sector
Unity wasn’t the only one affected by market jitters. Other video game-related companies also registered significant declines:
- Take-Two Interactive: -7.9%
- Roblox: -13.3%
- Alphabet (Class A): virtually flat closure
This move suggests that the market interpreted the announcement as a systemic threat to the video game development ecosystem, at least in the short term.
Is the market overreacting?
Several analysts believe Unity’s drop was disproportionate. Bhavan Suri of William Blair called the reaction “excessive ,” arguing that investors acted with a “shoot first, ask questions later” approach in the face of uncertainty surrounding AI.
Unity, headquartered in San Francisco, divides its business into two main areas:
- Create: tools for developing video games and interactive content.
- Grow: monetization solutions, advertising and live services.
Until Project Genie can be directly integrated into professional pipelines, many believe that game engines will remain essential.
What to watch for next week
With US markets closed for the weekend, attention shifts to Monday, February 2. Investors will be assessing whether Unity’s stock manages to stabilize or continues to decline as new comments emerge regarding Project Genie.
The next major catalyst will be Unity’s earnings report, due on February 11. The market will be watching closely:
- The evolution of demand for development tools .
- The performance of the advertising and monetization business .
- The company’s strategy in the face of the rise of AI-driven content creation .
AI and the future of video game development
The controversy is part of a broader trend: the automation of video game development to reduce costs. According to a recent survey, 87% of developers already use AI agents to speed up tasks, amidst layoffs and budget cuts in the industry.
The big question is whether Project Genie will mark a structural change or if, for now, it will remain a technology demonstration. The answer could define not only the direction of Unity, but of the entire gaming industry in the coming years.
