Elon Musk's xAI is entering the realm of video game development by implementing advanced AI world models, informed by principles of physics and dynamics. The team includes experts from Nvidia, such as Zeeshan Patel and Ethan He. Musk aims to produce an "AI-generated game" by the end of next year, with recruitment promising salaries from $180,000 to $440,000. However, industry veteran Michael Douse cautions that AI cannot replace vision and leadership in gaming development.