Technology company AMD reckons the next Xbox will be so powerful it will be capable of reproducing graphics on a par with James Cameron's movie blockbuster Avatar.

AMD, rumoured to be providing the graphics technology powering the next Xbox, said in the latest issue of the US version of the Official Xbox Magazine (reported by the Examiner) gamers should expect radical improvements to AI and physics.

Director of ISV relationships at AMD, Neal Robison, said the unannounced console will allow developers to make every pedestrian in a game such as Grand Theft Auto or Saints Row have a totally individual mentality so they react to the player in different ways.

Crowds will reportedly act as individuals rather than predictable mobs.

The Xbox 360 uses AMD's ATI Xenos to power its visuals. AMD refused to confirm whether it was working on the next Xbox.

Last month id Software programming legend John Carmack told Eurogamer the next generation of consoles will be ten times as powerful as the current generation.

Before that, Unreal Engine maker Epic Games released a real-time demo called Samaritan, below, it hopes provides a glimpse into the future of home console visuals.

The next Xbox is rumoured to be set for an E3 2012 reveal.