Epic Games CEO Tim Sweeney says the video game business is in its worst slump since the 1980s, a downturn some insiders are calling Crash 2.0.

In comments for Edge magazine, Sweeney pointed to two pressures at once: bloated AAA production costs inside studios, and a hardware squeeze from outside them. AI companies building data centers can pay more for chips, memory, and storage than game console and PC makers can. Entertainment, he said, is getting the short end of the stick.

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Hardware Prices Jump as AI Outbids Gaming

RAM and storage prices have already quadrupled in some cases and may keep climbing. Sweeney expects a continual supply crisis for all gaming-relevant hardware for about three years. That hits PCs, consoles, and the devices players need to run new games, just as development budgets keep rising and many big releases fail to recoup their costs.

Studios Cut Jobs as Costs Keep Rising

The industry has already seen waves of layoffs at Sony, Microsoft, EA, Ubisoft, Take-Two, and Epic itself. Companies have blamed the post-pandemic hangover, longer production cycles, weaker consumer spending, and now component scarcity driven by AI demand.

More Factories, Not Quick Fixes

Sweeney called the shortage an unexpected, severe disruption. His proposed fix is simple in theory and slow in practice: build massive new factories so supply can catch demand. And that will happen, he said. Until then, hardware will stay expensive and scarce, and studios will have less room to count on cheaper, more powerful machines to paper over rising costs.

The 1983 crash, often tied to Atari’s collapse, nearly wiped out home consoles in North America. Sweeney’s comparison is meant as a warning, not a prediction of total collapse. Live-service hits still draw huge audiences. The risk is a narrower market: fewer affordable systems, fewer successful big-budget launches, and a longer wait for capacity to catch up with the AI boom.