People have tried this a bit and it doesn’t work well. Remember that most games have some sort of plot which needs to move forward without deviating too far and this is not easy to manage with AI. AI systems are predictive text tuned up, so they tend to wander in the conversation and this can be disastrous for something like a video game.

The world is there to support the illusion but also to direct the player to game material. An AI agent going off on a tengent about some random thing that kind of fits the world could lead to users running around wasting their time and being frustrated.

Add to that the risk of the AI system stepping into awful places like reproducing Nazi ideology and it is a nightmare for developeds. Imagine getting your game rated when it can randomly start telling your character not to worry about saving those people over there because their skin tone is darker and that makes them less than human.

Now as a tool for building scripts quickly? Maybe, but it does produce slop now and if that will change I cannot predict when. Maybe it could be used as part of the process but I think it is so toxic now I would not bet on it. I also think it should be labeled as the use of AI comes with moral issues around the environmental impact and theft of content from other people. If a game has AI generated content I won’t be playing it, and I am not alone. Just the push back from audiences could be enough to discourage the use of AI systems.

Now on the other hand using a neural network design for making character behaviours more believable, for example using a series of needs and having the algorithm decide what to do next and so on, that could be cool, but we have that already and it isn’t considered AI.