Morgan Stanley Downgrade’s Price Targets for Poker Stocks

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Morgan Stanley has recently downgraded the price targets on GVC Holdings, Playtech and The Stars Group (TSG) amid concerns that the online poker industry will face a long-term threat from poker-playing artificial intelligence (AI). Also known as bots, poker-playing AI has been a hot topic in the online poker and computer science communities for years and this is because of their vested interest in the game – poker poses the kind of difficult-but-well-defined problem that is perfect for research in Artificial Intelligence.

In July 2019, Facebook Inc. and Carnegie Mellon University unveiled a new AI program known as Pluribus that managed to beat five poker pros in a six-player Texas Hold’em tournament. This was a monumental development since unlike previous AI bots that had been trained to play games like chess, Pluribus did not require the use of expensive supercomputer or multiple powerful servers. Instead, the Pluribus strategy is not only affordable but also very quick to replicate on a technical level.

Why the Concern

Ed Young, an analyst at Morgan Stanley has said that the emergence, or rather reemergence, of poker bots is now “a matter of when not if” and this makes the players have even more doubts on the game which is already exposed to the threat of bots due to its multiplayer nature and its reliance on skill. For many poker players, poker is much more than just a pastime but also serves as their professions which means they only want to play at sites whose systems they can trust. A breach of this trust will certainly have a negative impact on the number of players, both professional and recreational, taking part on the games – this is a huge problem for the poker operators whose main source of revenue is the players.

Even though behemoth online gambling operators such as the trio of poker operators whose stocks were downgraded by Morgan Stanley have top-notch safeguards that are meant to protect against bots, these safeguards do not protect them from a bad reputation. According to the investment firm’s analysts, the proliferation of AI bots present some very “plausible risks” in the form of the loss of both revenue as a result of the loss of player confidence.

In essence, Morgan Stanley believes that bots themselves do not the biggest threat as the gaming operators can always try to mitigate against them. However, the fear of being swindled by bot-powered accounts is something that many players are very fearful of and controlling these perceptions can be a nightmare.

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