PUBG Developer Plans a Spending Spree in Search of More Hits

South Korea’s biggest gaming company is expanding its portfolio of original content and pairing that strategy with years of investment in artificial intelligence, Chief Executive Officer Kim Changhan said in an interview. Under Kim’s leadership, Krafton has built a team of 80 engineers dedicated to deep learning and AI and it plans to add 35 more this year, he added.

“We have ambitious plans to scale our business,” said the 50-year-old executive and engineer. Krafton has spent roughly $680 million over the past two years acquiring and taking minority stakes in game studios and startups from Texas to Tokyo, according to Kim.

Krafton’s shares in Seoul are up more than 70% since the start of 2024, as the company reported record revenue in the first three quarters of the year. A partner to Tencent Holdings Ltd. and the operator of one of the most popular game franchises internationally, Krafton makes almost all its revenue from outside Korea and posted operating margin of 45% in the third quarter.

At CES in Las Vegas last week, Krafton teamed up with Nvidia Corp. to showcase new AI technology for making more lifelike non-player characters. Dubbed a co-play character, it aims to give an internal life and logic to the actions of people depicted in games, with dynamic adjustments to behavior based on player-selected traits and particular situations. Built on Nvidia’s small language model, this will debut in Krafton’s Inzoi life simulation game, which is scheduled for early access on PC in March.

Krafton plans to add similar AI features — with processing done on the device the game is played on — to the PUBG franchise as well. The details are yet to be finalized, as the company has to ensure its new additions still run well for players who don’t yet have a high-performing, AI-friendly graphics card, Kim said.

Both Kim and Krafton founder Chang Byung-gyu graduated from Korea’s elite engineering schools. Since assuming the CEO role in 2020, Kim has been expanding investments in India. When the local government banned the Tencent-distributed PUBG Mobile in 2020, Krafton took on the role of publishing it directly, and in 2023 the game was allowed to return. The company has more than 100 staff working on growing its operations in India, Kim said.

Krafton officials have met with or reviewed more than 1,000 gaming studios for potential investment over the past two years, an unusually high number for the industry.

Krafton’s acquisitions in recent years include Madrid-based EF Games and Japan’s Tango Gameworks. It has also taken a stake in Texas-based studio Ruckus Games, video game startup Wolf Haus Games in Montreal and Day 4 Night Studios in the US.