TLDR Morningstar says artificial intelligence poses limited risk to the land-based gaming businesses of Aristocrat Leisure and Light & Wonder Licences, regulatory ties, and large installed machine bases protect the two major suppliers Share prices fell mainly due to concerns about digital businesses, not the strength of gaming machines Aristocrat is gaining market share while Light & Wonder is holding its position Smaller suppliers such as IGT and Ainsworth Game Technology face more pressure as AI use grows
Morningstar Equity Research says artificial intelligence poses a limited threat to the land-based gaming businesses of Aristocrat Leisure and Light & Wonder. The research firm points to licences, regulatory relationships, and large installed bases of leased machines as protection for these companies.
Investors have worried that AI could lower barriers to entry. That fear has weighed on share prices for both companies this year.
Morningstar says this concern overlooks the strength of the electronic gaming machine businesses at both suppliers. The firm believes the gap between strong and weak suppliers is actually widening.
Land-based electronic gaming machines make up most of the earnings for both companies. These machines also support a large part of Morningstar’s valuations for each business.
The research firm says these businesses benefit from leading market shares and long-standing customer relationships. Growing installed bases add further support.
Venue operators tend to be careful with floor space. They focus on revenue per machine, which makes them unlikely to hand space to unproven suppliers.
Machine performance depends on proven game titles that keep players engaged. Morningstar estimates Aristocrat and Light & Wonder together account for more than 60% of leased machines in North America.
Digital Business Concerns Weigh on Share Prices
Morningstar says the share prices of both companies have been overly shaped by sentiment around their digital