The Witcher 4 and Cyberpunk 2 boss is skeptical AI can replace "industry talent" and can’t imagine "reducing headcount thanks to" the tech: "It’s not gonna be making The Witcher 5"

Michał Nowakowski, joint CEO of CD Projekt, told investors on the Q3 2025 earnings webcast that while AI delivers meaningful productivity benefits, he does not believe it is displacing game developers or enabling headcount reductions, and attributes industry redundancies more to project cancellations. He argued AI cannot 'sit down and make games' or replace development of future titles such as The Witcher 5, signaling limited near-term cost-cutting or structural margin improvements driven by AI for the company. For investors, the remarks temper expectations for AI-driven efficiency gains or workforce reductions at CD Projekt and imply minimal immediate financial impact from AI on the company’s outlook.

Analysis

Market structure: CD Projekt’s stance frames AI as a productivity multiplier, not a headcount eliminator, which benefits AI-infrastructure and tooling providers (NVIDIA NVDA, AMD, Microsoft MSFT, Unity U) and large IP-rich publishers (ATVI, EA, TTWO) that can monetize higher output. Small/mid-cap studios and outsourcing firms (e.g., Keywords Studios KWS, Embracer EMBRAC-B) face competitive pressure as increased content supply could compress discoverability and ARPU by an estimated 10–30% over 12–36 months for low-quality titles.

Risk assessment: Tail risks include regulator action on AI-generated IP, high-profile litigation, and talent strikes; any one could knock 20–50% off small developers’ valuations within 6–18 months. Hidden dependencies: consumer acceptance of AI-created content and platform gatekeeper policies (Steam, MSFT, Sony) will determine monetization; key catalysts are a major AAA launch revealing AI limits or a significant copyright ruling in the next 6–12 months.

Trade implications: Favor long exposure to AI compute and platform winners (NVDA, MSFT, U) and underweight/short small studios with weak IP and high fixed costs (EMBRAC-B, KWS). Use options to express asymmetric upside in NVDA (12–24 month LEAPs) and hedged short positions in small-cap devs with tight stops. Rebalance over 3–12 months as quarterly releases and legal milestones occur.

Contrarian angle: The market underestimates that productivity gains may increase low-quality supply and intensify winner-take-most dynamics, boosting large-cap margins while permanently impairing mid/small-cap discovery economics. Historical parallel: adoption of 3D engines (Unity/Unreal) grew total output but concentrated profits — expect similar concentration here.

Key Decisions for Investors

• Establish a 2–3% portfolio long in NVIDIA (NVDA) via Jan 2027 LEAP calls (buy LEAPs equal to 2% notional); add 50% more on any pullback >15% within 6 months. Rationale: persistent AI compute demand regardless of headcount effects.
• Allocate 1–2% long to Microsoft (MSFT) stock for 6–18 months to capture Azure AI + Activision synergies; sell 3–6 month covered calls if MSFT rallies >20% to harvest premium.
• Take a 0.5–1% short position (equity or CFD) in Embracer Group (EMBRAC-B) or similar small-cap game devs with weak IP; set stop-loss at 20% adverse move and target 30–50% downside over 12 months tied to release cancellations or margin compression.
• Pair trade: Long NVDA (1.5% size) vs Short Embracer/KWS (1% size) to express spread between AI infrastructure winners and vulnerable content producers; review quarterly and unwind if spread narrows by >25%.
• Use options to hedge tail risk: buy 3–6 month out-of-the-money put protection (cost 0.25–0.75% portfolio) on a basket of mid/small-cap gaming names ahead of major release windows or anticipated regulatory decisions (next 60–180 days).