Microsoft pushes ahead with AI in gaming
Microsoft might say its top priority right now is security, but it’s been clear for months that AI is just as important. The odd division out has been Xbox, which hasn’t discussed its use of AI much in public. But that changed last week when Microsoft ripped the band-aid off and waded, somewhat clumsily, into the debate over AI in gaming.
Last Wednesday, Microsoft revealed Muse, its new AI model that can generate gameplay. It was trained on Ninja Theory’s Xbox game Bleeding Edge, and it can understand a 3D world and physics and then respond to players’ interactions. While Muse is a Microsoft Research project at heart, Microsoft presented it in a way that linked it directly to Xbox and the future of the company’s gaming efforts. That has divided opinion between those who argue that Microsoft will use this model to build games and lay off developers, and others who think this is still very early and simply another tool in a game developer’s kit.
I’ve been speaking to game developers over the past week to get a better understanding of the response to Muse. Of the handful I’ve spoken to, no one is willing to speak on the record for reasons like career concerns and the potential impact speaking out might have on game deals with Xbox. Most echo what David Goldfarb, developer and founder of The Outsiders, posted on X last week, “Fuck this shit.”
Goldfarb expanded on that brief response in an interview with Wired. “When we rely on this stuff we are implicitly empowering a class of people who own these tools and don’t give a fuck about how they reshape our lives,” he said.
That’s a concern I’ve heard from multiple game developers: if they accept these AI tools then what happens next? There’s a growing fear in the game industry right now that AI will replace human creators, and it’s not a baseless fear, either. Almost half (49 percent) of 3,000 respondents to a Game Developers Conference (GDC) 2024 survey said that generative AI tools are currently being used in their workplace, with 31 percent saying they personally use them. In an industry that’s already struggling with costs and layoffs, the anxiety over AI replacing jobs is high.
Some developers are hoping that models like Muse will be limited to the early stages of game development, where you could use an AI model to create some rough gameplay instead of sketching out ideas and concepts. Given how nascent Muse is, that seems like a reasonable assumption right now, but as models get more capable over time, where do the lines blur?
Microsoft CEO Satya Nadella described Muse as a “massive moment of wow” in a recent podcast. “We’re going to have a catalog of games soon that we will start using these models, or we’re going to train these models to generate, and then start playing them,” he said.
Microsoft is getting ready to release at least one AI-generated game on Copilot Labs, the company’s test bed for AI that requires a monthly $20 subscription to Copilot Pro. Sources familiar with Microsoft’s AI research work tell me the company has also been experimenting with several minigames that are best described as AI-infused. The games, developed by Microsoft Research, use generative models and both human writers and reviewers to create stories and illustrations. One of the minigames, Rushes, lets players select storylines and make choices that influence the AI-driven narrative.
I’m not expecting Microsoft to release these minigames, as they’re designed as research projects on how AI models and humans interact in game design, but the company could always highlight them in the future. Microsoft chose to demonstrate its Muse model running in real time during an employee-only town hall earlier this week, instead of these minigames.
The work between Microsoft Research and Xbox on minigames and models like Muse are just the beginning of Microsoft’s AI in gaming efforts. At GDC next month, Microsoft is planning to highlight more ways it’s using AI in gaming. In one session, Fatima Kardar, corporate vice president of gaming AI at Microsoft, will discuss “how Xbox is using AI to unlock new opportunities across the Xbox ecosystem for both players and game creators.” Another session will demonstrate how game developers and researchers at Microsoft are experimenting with new AI tools for gaming.
While many of Microsoft’s AI sessions at GDC will be future-looking, there are a couple from Blizzard that will detail how World of Warcraft developers use AI models to automate 3D armor fitting or how developers parse through player feedback using large language models. These show off the potential for AI tools to assist developers rather than replace them, so they’re likely to be far less controversial than an AI model that generates gameplay.
Microsoft says it’s now leaving it up to its own game studios to decide on how AI is used across their games. “We don’t intend to use this technology for the creation of content,” said Ninja Theory studio head Dom Matthews, in a video accompanying Microsoft’s Muse announcement last week. Just days later though, Microsoft-owned Activision was forced to confirm that Call of Duty uses AI-generated content. The confirmation came months after fans noticed a zombie Santa with six fingers in a loading screen in Black Ops 6 over the holidays, alongside weapon decals and player cards that seemed to be AI generated.
How Microsoft’s other Xbox game studios react to its push for AI in gaming is going to be something to keep an eye on throughout 2025, especially when developers outside of Xbox have loudly criticized AI use in game development, with one indie developer creating a “No Gen AI” seal that developers can use on their game’s store page. There might be growing pushback against AI in gaming from developers and players, but I don’t think it will be long until other Xbox game studios make the decision to use AI tools or AI-generated content. By unveiling Muse last week, Microsoft has made clear it wants its studios to be at the very forefront of AI in gaming, regardless of the pushback.
- Microsoft is testing free Office for Windows apps with ads. Surprisingly, Microsoft has quietly started allowing some countries to install a free version of Office for Windows that includes ads. Microsoft has confirmed it’s just a test for now, but it’s a pretty big test to overhaul how Office is distributed in certain countries. The ad-supported version of Office includes banners that are permanently visible at the side, as well as 15-second video ads that play every few hours. Given this appears to be largely limited to India, I suspect Microsoft is looking at ways it can tempt people into paying for Office instead of pirating it. Microsoft’s own tests in 2018 showed that 91 percent of new PCs in India came loaded with pirated software.
- Microsoft launches next-gen Phi AI models. While we await OpenAI’s GPT-4.5 model, Microsoft made a smaller AI model announcement of its own this week. Phi-4-multimodal and Phi-4-mini are Microsoft’s latest small language models, and both are now available on Azure AI Foundry and Hugging Face. Both can be used by developers on smartphones, PCs, and cars, and Phi-4-multimodal improves speech recognition, translation, summarization, audio understanding, and image analysis.
- Xbox’s new Fable game is delayed to 2026. Rumors have been circulating that Fable might not make its 2025 release window, and Microsoft confirmed this week that it’s being pushed to 2026. Given how busy 2025 is looking for Xbox games, I’m not surprised Fable has been given more time here. The question now is whether Microsoft is still targeting a 2025 release for Gears of War: E-Day, like I’d heard last year.
- Microsoft makes Copilot Voice and Think Deeper free with unlimited use. Microsoft made OpenAI’s o1 reasoning model free for all Copilot users last month, and now it’s providing unlimited use of this model and Copilot’s voice capabilities to everyone this week. I think we’re going to see a lot more Copilot announcements in the coming months, and I’ve heard multiple times from sources recently that Microsoft is very focused on increasing AI usage by reducing the barriers to entry and the costs involved.
- You’ll need more Microsoft Rewards points to pay for Game Pass soon. Microsoft is bumping the amount of points it takes to get Game Pass through its Rewards program. It now costs level two members 17,000 (previously 12,000) points for a month of Xbox Game Pass Ultimate, with PC Game Pass jumping to 10,500 points (previously, 7,500).
- Scientists question Microsoft’s claims of a quantum computing breakthrough. Microsoft was quick to claim it had reached a milestone breakthrough in quantum computing last week, unveiling its Majorana 1 chip. Now, the physics community has a lot of questions about Microsoft’s paper, which the company is promising to address at the APS meeting in March.
- Indiana Jones now has DLSS 4 support. Bethesda updated Indiana Jones and the Great Circle with DLSS 4, Multi Frame Generation, and even FSR 3.1 Frame Gen support last week. That’s great news for PC players, and we’re now waiting to hear if Indiana Jones is going to make Microsoft’s target of an April release on PS5.
- Microsoft completes EU sovereign cloud project. Microsoft has finalized its multiyear project to allow its European commercial and public sector customers to store and process their data within European Union countries. “This milestone is the culmination of a massive, multiyear engineering effort across hundreds of Microsoft product teams and thousands of developers around the globe,” says Microsoft.
- Microsoft pauses the rollout of its redesigned Windows 11 battery indicator. Microsoft started rolling out an improved battery indicator to Windows 11 PCs last week, hitting the Release Preview ring before a broader rollout. Just days later, Microsoft paused it “to address some issues.” It’s not clear exactly what those issues are, but Microsoft says it plans to “begin rolling it out in a future update soon.”
- Microsoft has reportedly dropped some AI data center leases. Microsoft has committed to spending $80 billion this fiscal year on AI data centers, but there are signs it might be wavering on that commitment. Bloomberg reports that US brokerage TD Cowen warned that Microsoft has pulled back on some leases for US data center capacity. Microsoft hasn’t commented on the report directly, and one analyst has suggested this could be just “business as usual” with Microsoft free to “move in and out of data center leases, many of which were never officially signed.”
- Microsoft calls on the Trump administration to ‘avoid a strategic misstep in the AI global race.’ Microsoft vice chair and president Brad Smith has penned an open letter to the Trump administration, asking it to change the Biden administration’s interim AI diffusion rule that caps the export of US AI components. Smith argues that the rule will “give China a strategic advantage” in the AI race, and could prevent US allies and partners from accessing AI infrastructure and services from Microsoft and other US tech companies.
What do you think about Microsoft’s big push for AI in gaming? Drop a comment here, or you can always reach me at notepad@theverge.com if you want to discuss the Xbox AI changes in more detail. If you’ve heard about any of Microsoft’s secret projects, you can also reach me via email at notepad@theverge.com or speak to me confidentially on the Signal messaging app, where I’m tomwarren.01. I’m also tomwarren on Telegram, if you’d prefer to chat there.
Thanks for subscribing to Notepad.
Source link
