Microsoft is currently testing a new AI-powered Xbox chatbot that can be used to automate support tasks. Sources familiar with Microsoft’s plans tell The Verge that the software giant has been testing an “embodied AI character” that animates when responding to Xbox support queries. I understand this Xbox AI chatbot is part of a larger effort inside Microsoft to apply AI to its Xbox platform and services.

The Xbox AI chatbot is connected to Microsoft’s support documents for the Xbox network and ecosystem, and can respond to questions and even process game refunds from Microsoft’s support website. “This agent can help you with your Xbox support questions,” reads a description of the Xbox chatbot internally at Microsoft.

Microsoft expanded the testing pool for its Xbox chatbot more broadly in recent days, suggesting that this prototype “Xbox Support Virtual Agent” may one day handle support queries for all Xbox customers. Microsoft confirmed the existence of its chatbot to The Verge.

“We are testing an Xbox Support Virtual Agent, an internal prototype of an animated character that can query Xbox Support topics with voice or text,” says Haiyan Zhang, general manager of gaming AI at Xbox, in a statement to The Verge. “The prototype makes it easier and quicker for players to get help with support topics using natural language, taking information from existing Xbox Support pages.”

I’m told the Xbox chatbot is similar to what Microsoft encourages its own customers to build to automate support tasks. Microsoft has its own Azure AI Bot Service that businesses like Vodafone, PwC, and others use to build conversational AI bots.

The Xbox chatbot starts by asking players “How can I help you today?” and can quickly respond to support requests ranging from a broken Xbox to helping resolve issues with paid subscriptions. Sources tell me the Xbox chatbot is also currently being tested internally at Microsoft against support queries for the Minecraft Realms subscription-based server hosting service.

Microsoft’s prototype Xbox chatbot is part of a broader effort inside Microsoft Gaming to bring AI-powered features and tools to the Xbox platform and developer tools. Sources tell me that Microsoft is also working on bringing AI features to game content creation, game operations, and its Xbox platform and devices. This includes experimenting with AI-generated art and assets for games, AI game testing, and the generative AI NPCs that Microsoft has already partnered with Inworld to develop.

Microsoft is also considering building AI-powered Copilots for safety and moderation tasks, including content moderation on the Xbox platform and to help with enforcement and appeals processes. Microsoft is also looking at how it could add AI-powered assistants into games, providing ways for players to get help while they play.

Xbox employees haven’t publicly acknowledged the broader AI efforts for Microsoft Gaming, in part because the company is moving cautiously as it navigates perceptions around AI in gaming. Microsoft CEO Satya Nadella has been pushing all of the company’s businesses to think about how AI can be used in products and services, but Xbox has largely been focused on the developer side of AI tools so far.

During an Xbox all-hands meeting earlier this year Microsoft executives outlined an “Xbox Everywhere” vision that included “AI innovation” as a key part of that ambition, alongside its device ecosystem and an Xbox platform that lets players play anywhere they want.

Microsoft teased an ultrapowerful next-generation Xbox just days after that all-hands meeting, with Xbox president Sarah Bond promising “the largest technical leap you will have ever seen in a hardware generation.” I understand part of that technical leap will involve AI.

Sony is rumored to be preparing to launch a PS5 Pro console later this year that includes PlayStation Spectral Super Resolution (PSSR), an image upscaling technique that’s similar to Nvidia’s DLSS or AMD’s FSR. AI-powered Image upscaling on consoles hasn’t been as widely adopted as PC equivalents of games, with Immortals of Aveum set to become the first console game with AMD’s FSR 3 frame generation support soon. Microsoft will be keen to not fall behind any of Sony’s AI upscaling efforts.

Microsoft is clearly thinking a lot about AI in gaming, but how it shows up first probably won’t be the advanced ways it’s currently debating internally. Instead, it could appear with an animated smile when you’re trying to work out how to fix an Xbox error code.