Incorrect. I mean, I agree that games aren't taking advantage of it much yet, cut the capability is already there. Every time someone who doesn't actually follow AI closely says something like "AI can't do blah blah" they're always up to a year behind the fact that yes, AI actually can do blah blah.
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This is just a few that I did in a few minutes in my own stable diffusion set up, no optimal cinematic checkpoints installed to get environments to match the fear/sad/other, etc. But with enough playing with prompts I can get these somewhat subtle emotions to extremes. (No detailers and no refiners since this was just a quick demo, so no complaining that the models have no depth or are kind of jank. Yeah, I noticed the teeth

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And as for video...I don't have the computer to generate examples in a timely manner, but those exist too.