In the consumer market of 2025, AI toys are reshaping the industry landscape at an unimaginable speed. They have not only become a new consumption hotspot across all age groups but have also ushered in the ‘golden age’ of AI toy industry development. Products that meet the dual needs of children for ‘education + entertainment’, cater to the emotional companionship preferences of Generation Z, and serve as memory assistants for the elderly, are breaking the traditional boundaries of toy scenarios with technologies such as multimodal interaction and emotional computing, laying a solid product and technical foundation for the onset of this ‘golden age’.
This year, reporters from the Securities Daily have frequently encountered AI toys in supermarkets and industry conferences. These products, resembling ‘technology sprites’, can not only engage in lively conversations with children and vividly tell stories but also possess powerful memory capabilities—accurately remembering the voices and preferences of their conversational partners, transforming into caring intelligent companions. They have now firmly occupied the prime positions in many toy stores, becoming the undisputed ‘new favorites’ in the eyes of children.
AI toys not only provide users with an unprecedented novel experience but also bring new opportunities for the development of the toy industry. According to predictions from consulting firm IMARC, the global AI toy market size is expected to rise from $18.1 billion in 2024 to $60 billion by 2033, with a compound annual growth rate of about 14% from 2024 to 2033. This paints a blue ocean for the toy industry, which is often viewed as a traditional sector.
Market Boom
All-Age Coverage Sparks New Consumption Trends
In the eyes of parents born in the 1980s and 1990s, AI toys are undoubtedly the ‘screen-free educational artifacts’—they can interact with children in an engaging way in English, guide them to use logical reasoning to solve problems through puzzles and challenges, and provide quick feedback to children’s questions. This type of toy, which combines a sense of technology with educational entertainment, allows children to gain knowledge in a relaxed atmosphere while quietly prying open parents’ wallets. Data from JD.com confirms this trend: in the first half of 2025, sales of AI toy products surged sixfold month-on-month, with a year-on-year growth rate exceeding 200%, showcasing astonishing market explosiveness.
The audience for AI toys is not limited to children; it also covers the current main consumer force, Generation Z. Office worker Zhang Qingyu (pseudonym) carefully selected an AI toy priced at 499 yuan on an e-commerce platform. Although it is more expensive than ordinary toys, she feels it is worth every penny. ‘Its texture is soft and comfortable, and it has a pair of lively and playful big eyes, as if it can talk. Sometimes when I am under a lot of work pressure and don’t want to confide in anyone, I feel lonely and will chat with it. It tells various interesting jokes to cheer me up, making me feel like I have a ‘close friend who understands me’ by my side.’
This ‘warm’ experience allows AI toys to break through traditional entertainment boundaries. Psychologist Zhang Rongxin analyzed to the Securities Daily that under the deep penetration of digital technology, AI toys have become not only a haven for emotional solace for young people but also an important carrier for emotional companionship, health management, and cognitive maintenance for the elderly. Their value lies not only in the innovative breakthroughs of technical functions but also in the clever reconstruction of intergenerational relationships through human-centered design, forming a new solution that deeply integrates technology and humanity, bringing more warmth and care to people’s lives.
Today, the market positioning of AI toys has expanded from children to all age groups, with e-commerce platforms becoming important sales battlegrounds. During this year’s ‘618’ shopping festival, a new AI toy was launched and quickly sold out.
The hot sales of this product stem precisely from its accurate capture of the companionship needs of Generation Z. It uses multiple emotional models to sensitively perceive emotional fluctuations in users’ tones, avoids mechanical feelings with ‘delayed responses that simulate human thinking rhythms’, and can remember key information mentioned by users to actively respond in the next interaction.
Hong Tao, vice president of the China Consumer Economics Association and director of the Business Economics Research Institute at Beijing Technology and Business University, analyzed to the Securities Daily that current AI toys focus on essential scenarios such as children’s education and emotional companionship, fully developing high-cost performance products, such as tactile feedback interactive toys designed for younger children, allowing them to experience the charm of technology through touch, or launching companion robots with health monitoring functions for the elderly, constantly paying attention to their physical health and quickly capturing specific market segments.
Hong Tao stated: ‘AI toys achieve a more authentic interactive experience through advanced technologies such as voice recognition and emotional computing. Although the R&D threshold for AI toys is high, the cost advantages become significant after large-scale production, and the future development prospects are very broad.’
Capital Layout
Collaborative Synergy Builds Industry Ecosystem
The rise of AI toys relies not only on the maturity of technology with intelligent AI modules and decreasing application costs but also on strong market demand and robust capital promotion. After this sector emerged in 2024, the number of related enterprises surged. According to Tianyancha data, the number of registered toy-related enterprises has increased year by year over the past five years, peaking in 2024. Analysts from the China Business Industry Research Institute predict that the scale of China’s AI toy market will increase to 29 billion yuan by 2025 and further rise to 85 billion yuan by 2030.
On the capital side, this year, the number and amount of financing in the AI toy field have shown significant growth, with nearly a hundred investment institutions entering the market, and many startups successfully securing multiple rounds of financing.
Yan Xianbiao, CTO of Shenzhen Liangxu Huanqiu Technology Co., Ltd., told reporters that since last year, investment and financing activities in the domestic AI toy field have become increasingly active, with several leading enterprises receiving large amounts of financing this year, greatly encouraging the enthusiasm of industry entrepreneurs. AI toys differ from traditional toys; they focus more on the development of experiential content and scenarios, providing consumers with emotional value and continuous services.
In terms of enterprise layout, the trend of cross-industry collaboration is evident. For example, listed company Tom Cat will launch an AI emotional companion robot in late December 2024, entering the AI emotional companionship market from the mobile application and gaming sectors. Its semi-annual report for 2025 shows that the company is gradually building a ‘hardware + content + service’ ecological closed loop based on its self-developed Tom Cat emotional companion vertical model combined with cutting-edge MoE architecture, embedded software, and intelligent hardware. Currently, the Tom Cat AI emotional companion robot primarily generates revenue from hardware sales.
Zhang Cuixia, chief investment advisor at Jifeng Investment, stated in an interview with the Securities Daily that from the perspective of enterprises laying out AI toys to seize market opportunities, in addition to complete machine manufacturing and IP operation companies, listed companies engaged in localized AI processing, multimodal interaction, and other technology R&D have also successively announced related projects applying their products to AI toys this year. These upstream and downstream enterprises are striving towards deeper technology, product IPization and emotionalization, industrial collaboration, and market globalization, further enhancing the attractiveness of their products.
The international market is also active. Recently, AI toy startup Bondu, headquartered in San Francisco, announced the completion of a $5.3 million seed round of financing.
Behind the capital frenzy is a deep bet on the commercialization of ’emotional value’. The traditional toy industry has long hovered around a gross profit margin of 20% to 30%. In contrast, AI toys have achieved value upgrades through technological empowerment, with some mid-to-high-end AI toy product manufacturers reporting gross profit margins exceeding 70%.
Regarding industry competition and the industrial chain, the Forward Industry Research Institute pointed out in the ‘Market Outlook and Investment Strategy Planning Analysis Report of China’s Intelligent Toy Industry’ that currently, there are relatively few participants in China’s AI toy sector, with low industry concentration and a diversified competitive landscape, where technological iteration and IP competition dominate.
Chen Xiaohua, executive director of the Education and Science Technology Research Institute of the China Mobile Communications Association, told the Securities Daily that the traditional toy market, relying on mature supply chains and classic IPs, still occupies the mainstream toy market position, but it is accelerating its transformation towards intelligence. For example, companies like Aofei Entertainment are integrating AI technology into their own IP products. AI toy companies are accelerating product R&D and market expansion, with their strategies for capturing market share focusing on transcending basic entertainment functions, highlighting the core values of emotional companionship and personalized growth consulting, while also exploring reasonable ‘hardware + subscription’ service models to enhance product lifecycle value.
Facing Challenges
Breaking Homogeneity to Seek Upgrade Paths
Currently, AI toys have expanded into multiple categories, with some focusing on IP operation and emotional services, while others precisely target educational scenarios. This diversification is driving the industry towards higher added value. However, the industry also faces a homogeneity dilemma, with product designs becoming similar, AI functions relying on the same service providers, and interaction methods lacking a natural and smooth feel.
Technology is the core foundation of AI toys, and their competitiveness largely depends on the ability to achieve natural conversations akin to real people and accurately understand language and emotions, which heavily relies on large language models and interaction technologies. According to research by the Securities Daily, although most AI toys claim to be equipped with advanced large models capable of fluent dialogue, the actual Q&A interactions are often formulaic, lacking emotional warmth, and generally lacking continuous learning and personalization capabilities.
Hua Dong, an AI engineer at Dongqipeng Electronics Technology Co., Ltd., told reporters that AI toys are not simply traditional toys connected to AI large models; that is merely a basic capability. On the software side, they need to have visual video recognition, voiceprint recognition, long-term memory functions (capable of remembering users’ words), and an expression library for feedback; on the hardware side, they need to achieve eye contact interaction, radar perception, greetings, touch points, and feedback functions. All these AI functions are crucial, and future competition will not only be a battle of software and hardware but also a competition of social AI, allowing AI toys to achieve environmental perception and natural interaction through the integration of voice recognition, computer vision, and tactile feedback.
In addition to technical challenges, AI toys also face a trust crisis regarding information security and privacy protection. AI toys often collect children’s voiceprints, facial images, behavioral trajectories, and even family environment information through cameras, microphones, and other sensors, and the risks of covert collection and potential misuse urgently require strict data privacy safeguards. Moreover, excessive reliance on AI toys by minors may affect their social skills and emotional cognitive development, such as reducing real interpersonal interactions, difficulty adapting to delayed feedback, or being misled by anthropomorphized emotional expressions.
‘To break the homogeneity dilemma of AI toys, the key lies in innovation,’ said Fu Yifu, a special researcher at Su Commercial Bank. Enterprises should increase R&D investment, deeply explore users’ potential needs, and develop products with unique functions and features, such as AI toys targeting specific age groups or scenarios. At the same time, more attention should be paid to user experience design, enhancing product usability and stability, reducing stuttering and malfunction occurrences. Additionally, brand building should be strengthened to shape a unique brand image and values, enhancing product core competitiveness through brand differentiation. In summary, the core competitiveness of AI toys should focus on technological innovation, content innovation, user experience, and brand value to meet consumers’ demands for high-quality, personalized products.
The rise of AI toys is a model of the deep integration of technology and humanity and an inevitable trend of industrial upgrading. From the explosive growth of market scale to the coverage of users across all age groups, from the capital market’s pursuit to continuous breakthroughs in technological innovation, AI toys are reshaping the toy industry landscape with an unstoppable momentum, ushering in the ‘golden age’ of the industry. They are not only the ‘new blue ocean’ of the toy industry but also a ‘pressure relief valve’ for social emotional needs. The arrival of this ‘golden age’ makes AI toys a bridge connecting technology and humanity, commerce and emotion, bringing more surprises to people’s lives.
Source: Securities Daily