The gaming industry is being transformed by the integration of generative AI, which promises to revolutionize player interactions with NPCs and enhance gameplay experiences. Startups like Jam & Tea Studios are leading the charge with games like Retail Mage, where AI-driven NPCs offer dynamic and personalized interactions. However, the adoption of AI in gaming also raises significant ethical concerns, including job displacement, data privacy, and the potential for bias, which developers must navigate carefully to ensure fair and responsible use of the technology.