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A gamer uses a computer powered with an Nvidia Corp. chip at the Gamescon video games trade fair in Cologne, Germany, on Wednesday, Aug. 23, 2023. Gamescon runs until Sunday, Aug. 27. Photographer: Alex Kraus/Bloomberg via Getty Images

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It’s not just human life that will be remade by the rapid advance in generative artificial intelligence. NPCs (non-playable characters), the figures who populate generated worlds in video games but have to date largely run on limited scripts — think the proprietor of the store you enter — are being tested as one of the first core gaming aspects where AI can improve gameplay and immersiveness. A recent partnership between Microsoft Xbox and Inworld AI is a prime example.

Better dialogue is just the first step. “We’re creating the tech that allows NPCs to evolve beyond predefined roles, adapt to player behavior, learn from interactions, and contribute to a living, breathing game world,” said Kylan Gibbs, chief product officer and co-founder of Inworld AI. “AI NPCs are not just a technological leap. They’re a paradigm shift for player engagement.”

It’s also a big opportunity for the gaming companies and game developers. Shifting from scripted dialogue to dynamic player-driven narratives will increase immersion in a way that drives replayability, retention, and revenue.

The interaction between powerful chips and gaming has for years been part of the success story at Nvidia, but there is now a clear sense in the gaming industry that it is just beginning to get to the point where AI will take off, after some initial uncertainty

“All developers are interested in how artificial intelligence can impact game development process,” John Spitzer, vice president of developer and performance technology at Nvidia, recently told CNBC, and he cited powering non-playable characters as a key test case. 

We'll be working on how to power non-player characters using AI in gaming, Nvidia says

It’s always been true that technological limits and possibilities overdetermine the gaming worlds developers can create. The technology behind AI NPCs, Gibbs says, will become a catalyst for a new era of storytelling, creative expression, and innovative gameplay. But much of what is to come will be “games we have yet to imagine,” he said.

Bing Gordon, an Inworld advisor and former chief creative officer at Electronic Arts, said the biggest advancements in gaming in recent decades have been through improvements in visual fidelity and graphics. Gordon, who is now chief product officer at venture capital firm Kleiner Perkins and serves on the board of gaming company Take-Two Interactive, believes AI will remake the world of both the gamer and game designer.

“AI will enable truly immersive worlds and sophisticated narratives that put players at the center of the fantasy,” Gordon said. “Moreover, AI that influences fundamental game mechanics has the potential to increase engagement and draw players deeper into your game.”  

The first big opportunity for gen AI may be in gaming production. “That’s where we expect to see a major impact first,” said Anders Christofferson, a partner within Bain & Company’s media & entertainment practice.

In other professional tasks, such as creating presentations using software like PowerPoint and first drafts of speeches, gen AI is already doing days of work in minutes. Initial storyboard design and NPC dialogue creation are made for gen AI, and that will free up developer time to focus on the more immersive and creative parts of game making, Christofferson said.

Creating unpredictable worlds

A recent Bain study noted that AI is already taking on some tasks, including preproduction and planning out of game content. Soon it will play a larger role in developing characters, dialogue, and environments. Gaming executives, Bain’s research shows, expect AI to manage more than half of game development within five years to a decade. This may not lead to lower production costs — blockbuster games can run up total development costs of $1 billion — but AI will allow games to be delivered more quickly, and with enhanced quality.

Ultimately, the proliferation of gen AI should allow the development process of games to include the average gamer in content creation. This means that more games will offer what Christofferson calls a “create mode” allowing for increased user-generated content — Gibbs referred to it as “player-driven narratives.” 

The current human talent shortage, a labor issue that exists across the software engineering space, isn’t something AI will solve in the short-term. But it may free developers up to put more time into creative tasks and learn how best to use the new technology as they experiment. A recent CNBC study found that across the labor force, 72% of workers who use AI say it makes them more productive, consistent with research Microsoft has conducted on the impact of its Copilot AI in the workplace.

“GenAI is very nascent in gaming and the emerging landscape of players, services, etc. is very dynamic – changing by the day,” Christofferson said. “As with any emerging technologies, we expect lots of learning to take place regarding GenAI over the next few years.”

Given how much change is taking place in gaming, it may simply be too difficult to forecast AI’s scale at the moment, says Julian Togelius, associate professor of computer science and engineering at New York University. He summed up the current state of AI implementation as a “medium-size deal.”

“In the game development process, generative AI is already in use by lots of people. Programmers use Copilot and ChatGPT to help them write code, concept artists experiment with Stable Diffusion and Midjourney, and so on,” said Togelius. “There is also a big interest in automated game testing and other forms of AI-augmented QA,” he added. 

Generative AI will change the nature of many of our games in the future, says Take-Two Interactive CEO

The Microsoft and Inworld partnership will test two of the key AI implications in the video game industry: design-time and assistance with narrative generation. If a game has thousands of NPCs in it, having AI generate individual backstories for each of them can save enormous development time — and having generative AI working while players interact with NPCs could also enhance gameplay.

The latter will be trickier to achieve, Togelius said. “I think this is much harder to get right, partly because of the well-known hallucination issues of LLMs, and partly because games are not designed for this,” he said. 

Hallucinations occur when large language models (LLMs) generate responses that deviate from context or rational meaning — they speak nonsensically but grammatically, about things that don’t make sense or have any relation to the given context. “Video games are designed for predictable, hand-crafted NPCs that don’t veer off script and start talking about things that don’t exist in the game world,” Togelius said.

Traditionally, NPCs behave in predictable ways that have been hand-authored by a designer or design team. Predictability, in fact, is a core tenant of the video game world and its design process. Open-ended games are thrilling because of their sense of infinite possibility, but to function reliably there is great control and predictability built into them. Unpredictability in the gaming world is a new realm, and could be a barrier to having AI gain wider use. Working out this balance will be a key to moving forward with AI.

“I think we are going to see modern AI in more and more places in games and game development very soon,” Togelius said. “And we will need new designs that work with the strengths and weaknesses of generative AI.”

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How Elon Musk’s plan to slash government agencies and regulation may benefit his empire

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How Elon Musk’s plan to slash government agencies and regulation may benefit his empire

Elon Musk’s business empire is sprawling. It includes electric vehicle maker Tesla, social media company X, artificial intelligence startup xAI, computer interface company Neuralink, tunneling venture Boring Company and aerospace firm SpaceX. 

Some of his ventures already benefit tremendously from federal contracts. SpaceX has received more than $19 billion from contracts with the federal government, according to research from FedScout. Under a second Trump presidency, more lucrative contracts could come its way. SpaceX is on track to take in billions of dollars annually from prime contracts with the federal government for years to come, according to FedScout CEO Geoff Orazem.

Musk, who has frequently blamed the government for stifling innovation, could also push for less regulation of his businesses. Earlier this month, Musk and former Republican presidential candidate Vivek Ramaswamy were tapped by Trump to lead a government efficiency group called the Department of Government Efficiency, or DOGE.

In a recent commentary piece in the Wall Street Journal, Musk and Ramaswamy wrote that DOGE will “pursue three major kinds of reform: regulatory rescissions, administrative reductions and cost savings.” They went on to say that many existing federal regulations were never passed by Congress and should therefore be nullified, which President-elect Trump could accomplish through executive action. Musk and Ramaswamy also championed the large-scale auditing of agencies, calling out the Pentagon for failing its seventh consecutive audit. 

“The number one way Elon Musk and his companies would benefit from a Trump administration is through deregulation and defanging, you know, giving fewer resources to federal agencies tasked with oversight of him and his businesses,” says CNBC technology reporter Lora Kolodny.

To learn how else Elon Musk and his companies may benefit from having the ear of the president-elect watch the video.

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Why X’s new terms of service are driving some users to leave Elon Musk’s platform

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Why X's new terms of service are driving some users to leave Elon Musk's platform

Elon Musk attends the America First Policy Institute gala at Mar-A-Lago in Palm Beach, Florida, Nov. 14, 2024.

Carlos Barria | Reuters

X’s new terms of service, which took effect Nov. 15, are driving some users off Elon Musk’s microblogging platform. 

The new terms include expansive permissions requiring users to allow the company to use their data to train X’s artificial intelligence models while also making users liable for as much as $15,000 in damages if they use the platform too much. 

The terms are prompting some longtime users of the service, both celebrities and everyday people, to post that they are taking their content to other platforms. 

“With the recent and upcoming changes to the terms of service — and the return of volatile figures — I find myself at a crossroads, facing a direction I can no longer fully support,” actress Gabrielle Union posted on X the same day the new terms took effect, while announcing she would be leaving the platform.

“I’m going to start winding down my Twitter account,” a user with the handle @mplsFietser said in a post. “The changes to the terms of service are the final nail in the coffin for me.”

It’s unclear just how many users have left X due specifically to the company’s new terms of service, but since the start of November, many social media users have flocked to Bluesky, a microblogging startup whose origins stem from Twitter, the former name for X. Some users with new Bluesky accounts have posted that they moved to the service due to Musk and his support for President-elect Donald Trump.

Bluesky’s U.S. mobile app downloads have skyrocketed 651% since the start of November, according to estimates from Sensor Tower. In the same period, X and Meta’s Threads are up 20% and 42%, respectively. 

X and Threads have much larger monthly user bases. Although Musk said in May that X has 600 million monthly users, market intelligence firm Sensor Tower estimates X had 318 million monthly users as of October. That same month, Meta said Threads had nearly 275 million monthly users. Bluesky told CNBC on Thursday it had reached 21 million total users this week.

Here are some of the noteworthy changes in X’s new service terms and how they compare with those of rivals Bluesky and Threads.

Artificial intelligence training

X has come under heightened scrutiny because of its new terms, which say that any content on the service can be used royalty-free to train the company’s artificial intelligence large language models, including its Grok chatbot.

“You agree that this license includes the right for us to (i) provide, promote, and improve the Services, including, for example, for use with and training of our machine learning and artificial intelligence models, whether generative or another type,” X’s terms say.

Additionally, any “user interactions, inputs and results” shared with Grok can be used for what it calls “training and fine-tuning purposes,” according to the Grok section of the X app and website. This specific function, though, can be turned off manually. 

X’s terms do not specify whether users’ private messages can be used to train its AI models, and the company did not respond to a request for comment.

“You should only provide Content that you are comfortable sharing with others,” read a portion of X’s terms of service agreement.

Though X’s new terms may be expansive, Meta’s policies aren’t that different. 

The maker of Threads uses “information shared on Meta’s Products and services” to get its training data, according to the company’s Privacy Center. This includes “posts or photos and their captions.” There is also no direct way for users outside of the European Union to opt out of Meta’s AI training. Meta keeps training data “for as long as we need it on a case-by-case basis to ensure an AI model is operating appropriately, safely and efficiently,” according to its Privacy Center. 

Under Meta’s policy, private messages with friends or family aren’t used to train AI unless one of the users in a chat chooses to share it with the models, which can include Meta AI and AI Studio.

Bluesky, which has seen a user growth surge since Election Day, doesn’t do any generative AI training. 

“We do not use any of your content to train generative AI, and have no intention of doing so,” Bluesky said in a post on its platform Friday, confirming the same to CNBC as well.

Liquidated damages

Bluesky CEO: Our platform is 'radically different' from anything else in social media

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The Pentagon’s battle inside the U.S. for control of a new Cyber Force

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The Pentagon's battle inside the U.S. for control of a new Cyber Force

A recent Chinese cyber-espionage attack inside the nation’s major telecom networks that may have reached as high as the communications of President-elect Donald Trump and Vice President-elect J.D. Vance was designated this week by one U.S. senator as “far and away the most serious telecom hack in our history.”

The U.S. has yet to figure out the full scope of what China accomplished, and whether or not its spies are still inside U.S. communication networks.

“The barn door is still wide open, or mostly open,” Senator Mark Warner of Virginia and chairman of the Senate Intelligence Committee told the New York Times on Thursday.

The revelations highlight the rising cyberthreats tied to geopolitics and nation-state actor rivals of the U.S., but inside the federal government, there’s disagreement on how to fight back, with some advocates calling for the creation of an independent federal U.S. Cyber Force. In September, the Department of Defense formally appealed to Congress, urging lawmakers to reject that approach.

Among one of the most prominent voices advocating for the new branch is the Foundation for Defense of Democracies, a national security think tank, but the issue extends far beyond any single group. In June, defense committees in both the House and Senate approved measures calling for independent evaluations of the feasibility to create a separate cyber branch, as part of the annual defense policy deliberations.

Drawing on insights from more than 75 active-duty and retired military officers experienced in cyber operations, the FDD’s 40-page report highlights what it says are chronic structural issues within the U.S. Cyber Command (CYBERCOM), including fragmented recruitment and training practices across the Army, Navy, Air Force, and Marines.

“America’s cyber force generation system is clearly broken,” the FDD wrote, citing comments made in 2023 by then-leader of U.S. Cyber Command, Army General Paul Nakasone, who took over the role in 2018 and described current U.S. military cyber organization as unsustainable: “All options are on the table, except the status quo,” Nakasone had said.

Concern with Congress and a changing White House

The FDD analysis points to “deep concerns” that have existed within Congress for a decade — among members of both parties — about the military being able to staff up to successfully defend cyberspace. Talent shortages, inconsistent training, and misaligned missions, are undermining CYBERCOM’s capacity to respond effectively to complex cyber threats, it says. Creating a dedicated branch, proponents argue, would better position the U.S. in cyberspace. The Pentagon, however, warns that such a move could disrupt coordination, increase fragmentation, and ultimately weaken U.S. cyber readiness.

As the Pentagon doubles down on its resistance to establishment of a separate U.S. Cyber Force, the incoming Trump administration could play a significant role in shaping whether America leans toward a centralized cyber strategy or reinforces the current integrated framework that emphasizes cross-branch coordination.

Known for his assertive national security measures, Trump’s 2018 National Cyber Strategy emphasized embedding cyber capabilities across all elements of national power and focusing on cross-departmental coordination and public-private partnerships rather than creating a standalone cyber entity. At that time, the Trump’s administration emphasized centralizing civilian cybersecurity efforts under the Department of Homeland Security while tasking the Department of Defense with addressing more complex, defense-specific cyber threats. Trump’s pick for Secretary of Homeland Security, South Dakota Governor Kristi Noem, has talked up her, and her state’s, focus on cybersecurity.

Former Trump officials believe that a second Trump administration will take an aggressive stance on national security, fill gaps at the Energy Department, and reduce regulatory burdens on the private sector. They anticipate a stronger focus on offensive cyber operations, tailored threat vulnerability protection, and greater coordination between state and local governments. Changes will be coming at the top of the Cybersecurity and Infrastructure Security Agency, which was created during Trump’s first term and where current director Jen Easterly has announced she will leave once Trump is inaugurated.

Cyber Command 2.0 and the U.S. military

John Cohen, executive director of the Program for Countering Hybrid Threats at the Center for Internet Security, is among those who share the Pentagon’s concerns. “We can no longer afford to operate in stovepipes,” Cohen said, warning that a separate cyber branch could worsen existing silos and further isolate cyber operations from other critical military efforts.

Cohen emphasized that adversaries like China and Russia employ cyber tactics as part of broader, integrated strategies that include economic, physical, and psychological components. To counter such threats, he argued, the U.S. needs a cohesive approach across its military branches. “Confronting that requires our military to adapt to the changing battlespace in a consistent way,” he said.

In 2018, CYBERCOM certified its Cyber Mission Force teams as fully staffed, but concerns have been expressed by the FDD and others that personnel were shifted between teams to meet staffing goals — a move they say masked deeper structural problems. Nakasone has called for a CYBERCOM 2.0, saying in comments early this year “How do we think about training differently? How do we think about personnel differently?” and adding that a major issue has been the approach to military staffing within the command.

Austin Berglas, a former head of the FBI’s cyber program in New York who worked on consolidation efforts inside the Bureau, believes a separate cyber force could enhance U.S. capabilities by centralizing resources and priorities. “When I first took over the [FBI] cyber program … the assets were scattered,” said Berglas, who is now the global head of professional services at supply chain cyber defense company BlueVoyant. Centralization brought focus and efficiency to the FBI’s cyber efforts, he said, and it’s a model he believes would benefit the military’s cyber efforts as well. “Cyber is a different beast,” Berglas said, emphasizing the need for specialized training, advancement, and resource allocation that isn’t diluted by competing military priorities.

Berglas also pointed to the ongoing “cyber arms race” with adversaries like China, Russia, Iran, and North Korea. He warned that without a dedicated force, the U.S. risks falling behind as these nations expand their offensive cyber capabilities and exploit vulnerabilities across critical infrastructure.

Nakasone said in his comments earlier this year that a lot has changed since 2013 when U.S. Cyber Command began building out its Cyber Mission Force to combat issues like counterterrorism and financial cybercrime coming from Iran. “Completely different world in which we live in today,” he said, citing the threats from China and Russia.

Brandon Wales, a former executive director of the CISA, said there is the need to bolster U.S. cyber capabilities, but he cautions against major structural changes during a period of heightened global threats.

“A reorganization of this scale is obviously going to be disruptive and will take time,” said Wales, who is now vice president of cybersecurity strategy at SentinelOne.

He cited China’s preparations for a potential conflict over Taiwan as a reason the U.S. military needs to maintain readiness. Rather than creating a new branch, Wales supports initiatives like Cyber Command 2.0 and its aim to enhance coordination and capabilities within the existing structure. “Large reorganizations should always be the last resort because of how disruptive they are,” he said.

Wales says it’s important to ensure any structural changes do not undermine integration across military branches and recognize that coordination across existing branches is critical to addressing the complex, multidomain threats posed by U.S. adversaries. “You should not always assume that centralization solves all of your problems,” he said. “We need to enhance our capabilities, both defensively and offensively. This isn’t about one solution; it’s about ensuring we can quickly see, stop, disrupt, and prevent threats from hitting our critical infrastructure and systems,” he added.

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