A major investment bank has taken the surprising step of downgrading the “price targets” – or the future price of a stock – for several of the top performing online gaming and poker sites. The reason? The improvements in technology have become so good that it allows for artificial intelligence – or “bots” – to play the games and make them potentially unprofitable for both customers and companies in the future.
Three Major Online Companies Downgraded
On Thursday, Morgan Stanley downgraded the price targets for three of the major players in the online poker world. GVC Holdings, Playtech and The Stars Group were all hit by this downgrade, with the analysts citing advancements in the usage of computer programs that can play online poker better than humans being the main reason for the downgrade. The analysts stated that, although the profits for the companies would still go up, the impact of AI on their online poker products would reduce the level of their profits.
Morgan Stanley analyst Ed Young called out
the work of computer scientists from Carnegie Mellon University and their
program Pluribus, which defeated a six handed table of poker professionals
handily earlier this summer. Young and Co. stated that Pluribus was “stronger
than human professionals” now and, if the code for the AI were to ever be
released, it would have a “serious impact” on the integrity of online. “The AI
blueprint strategy was developed for a cloud-computing cost of just $144 in 8
days, runs on normal computers, plays twice as fast as professional player and
could be adapted for any poker variant,” Young’s team cites.
What does that all mean? That usage of such an AI, if unleashed on the online poker playing world, would reduce confidence in online poker and “pose a risk to earnings streams in the future.”
As stated previously, Morgan Stanley still sees the companies turning a profit, just not as much as they might have sans online poker’s AI problem. GVC Holdings (owners of partypoker, among others) and Playtech (provider of iPoker Network’s poker software) could see their potential future profits reduced 2% and 4%, respectively. They were more precise with The Stars Group, seeing their price target go to $17 per share rather than $18.
The news for other online gaming operations varied. 888 Holdings (operators of 888Poker and other U. S. operations including WSOP.com) was not called out with the other three major companies, but they “presumably” could be affected too. Young’s group also said that the threat to other players in the industry, such as the sports betting giant William Hill and the land-based casino operations such as MGM Resorts and Boyd Gaming (among others) would only see a “minor impact” from the advancements in AI.
AI Only Going to Get Better
The advancements in artificial intelligence – or AI – has only been improving over the last decade or so. The University of Alberta was one of the major developers of AI being used to play poker – after AI had already defeated humans in games like GO and chess – creating programs that could work out the issues in heads up NLHE play. A University of Alberta AI program called “DeepStack” was one of the first AIs to take on human players in heads up No Limit Hold’em situations and defeat them and another Alberta creation in 2015 “solved” (played “perfectly”) Limit Hold’em.
It was the work of developers at Carnegie Mellon who put the AI on steroids, however. Over the past three years, they have improved their programs. First was “Libratus,” which battled a quartet of professional players to a draw in 2017 and, with a few tweaks, would come back a year later to crush essentially the same quartet by a $1.8 million margin. But the final backbreaker was the development of “Pluribus,” which took on a six handed table of pros in September and defeated 15 players (the usage of different players presented “Pluribus” with the challenge of playing against several different styles) handily.
If such an AI could be employed in an online poker setting, it would basically ravage the industry. As such, Morgan Stanley is sending out the warning to potential stockholders – and maybe the online gaming and poker industry itself – that the potential problems of AI and “bots” must be taken seriously.