Investment Analysis Report on the AI Toy Industry: New Opportunities Driven by Policy and Technology

1 Industry Overview and Market Prospects

AI toys, as products that integrate “AI + toys,” have achieved a qualitative leap from traditional toys by incorporating large models and various artificial intelligence technologies (such as voice recognition, image recognition, natural language processing, deep learning, etc.). These toys can perform multimodal interactions, emotional understanding and feedback, and provide personalized learning and entertainment experiences, significantly distinguishing them from traditional smart toys that could only execute simple commands. According to He Yaqiong, Director of the Consumer Goods Industry Department of the Ministry of Industry and Information Technology, at a press conference on November 19, 2025, AI toys have become a new competitive track in the industry, breaking the age limitations of traditional toys and achieving full coverage for all age groups, meeting the diverse consumption needs of various age demographics.

From a developmental perspective, the Chinese AI toy industry has evolved from a technology exploration phase (before 2020) to a market budding phase (2020-2023), and is expected to enter a rapid development phase after 2024. Currently, the industry is in a rapid growth stage, with multimodal interaction becoming standard for mid-to-high-end products, and large model technology driving the intelligent upgrade of products. According to authoritative statistics, the market size of AI toys in China is expected to reach 24.6 billion yuan in 2024, and is projected to increase to 29 billion yuan in 2025, showing significant growth. In the long term, the market size of AI toys in China is expected to exceed 70 billion yuan by 2030, potentially reaching a trillion yuan level, with an estimated annual compound growth rate exceeding 50% during this period.

Table: Market Size and Forecast of AI Toys in China

Year	Market Size (Billion Yuan)	Growth Rate	Key Driving Factors
2024	24.6	–	Technology integration, changes in consumer demand
2025 (Forecast)	29	Approximately 17.9%	Policy support, cost reduction
2030 (Forecast)	70-100	CAGR >50%	Technology maturity, expansion of application scenarios

It is noteworthy that the market penetration rate of AI toys is expected to continue to rise. With the exponential increase in computing power and further decline in training costs in recent years, the penetration rate of AI applications will improve, with the annual compound growth rate of the Chinese AI toy market expected to exceed 70%. The booming market development brings vast investment opportunities for upstream and downstream enterprises in the industry chain, including hardware suppliers, technology providers, toy manufacturers, and channel distributors.

2 Dual-Driven by Policy and Technology

2.1 Policy Support Framework

The rapid development of the AI toy industry benefits from the comprehensive policy support at the national level. In recent years, the Chinese government has successively introduced a series of policy measures to promote the deep integration of artificial intelligence with the real economy:

“Artificial Intelligence +” Action Plan: This plan was first proposed in the government work report in March 2024, emphasizing the deep integration of artificial intelligence technology with traditional and emerging industries to create a new development ecosystem. This plan has created a favorable environment for the development of the AI toy industry and has accelerated the rapid application of artificial intelligence technology in the toy field.
Special Action Plan to Boost Consumption: In March 2025, the Central Committee of the Communist Party of China and the State Council issued a relevant plan that clearly proposed to carry out the “Artificial Intelligence +” action, promoting specific requirements for “Artificial Intelligence + consumption.” This plan directly lists AI toys as a key support area, providing clear policy guidance for the industry.
Implementation Plan to Promote the Adaptability of Supply and Demand for Consumer Goods: The Ministry of Industry and Information Technology has stated that it will work with relevant departments to formulate and release this plan, guiding toy companies to apply AI technology to create more new demands. This policy will provide protection for the AI toy industry from three levels: directional guidance, innovation incentives, and safety supervision, forming a complete guarantee system of “top-level design + innovation promotion + safety net.”

At the local level, Guangdong Province and other toy industry clusters have also introduced special action plans, establishing industrial clusters, R&D subsidies, and talent incentive policies to promote the rapid implementation of technology. These policies work together to provide a solid institutional guarantee and development momentum for the AI toy industry.

2.2 Technological Breakthroughs and Cost Optimization

At the technological level, breakthroughs in several key technologies and significant cost optimizations have laid the foundation for the popularization of AI toys:

Significant Reduction in Large Model Technology Costs: The costs of domestic AI large models are far lower than those of international giants, mainly reflected in training costs, inference costs, and hardware adaptation costs. For example, the inference cost of DeepSeek-R1 is about one-thirtieth of OpenAI’s operating cost; the API call price of Baidu’s Wenxin large model 4.5 is only 1% of GPT4.5. This cost advantage allows mid-to-low-priced AI toys to also incorporate advanced large model technology.
Accelerated Process of Chip Localization: In 2024, China’s AI chip market size exceeded 140 billion yuan, basically establishing a complete chain from basic research to industrial application. Although high-end design and chip manufacturing still rely on foreign technology, the localization process is accelerating, helping to reduce hardware costs and ensure supply chain security.
Maturity of Intelligent Sensor Technology: Chinese companies such as Goertek, Goodix, Weir, and Huagong Technology have achieved technological breakthroughs in subfields such as acoustic and image sensors. In 2023, the market size of intelligent sensors in China reached 142.96 billion yuan, and is expected to exceed 160 billion yuan in 2024, providing AI toys with precise environmental perception capabilities.
Continuous Upgrading of Interaction Technology: Multimodal interaction has become standard for mid-to-high-end AI toys, achieving natural and diverse interactions and feedback between toys and humans through technologies such as voice recognition synthesis, facial recognition, emotion analysis, gesture recognition, and tactile perception and feedback. The maturity of these technologies significantly enhances user experience and strengthens product market competitiveness.

3 In-Depth Analysis of the Industry Chain

3.1 Upstream Industry Analysis

The upstream of the AI toy industry chain mainly includes raw materials and software and hardware supply, with the hardware part having the highest value proportion and technical content:

Core Hardware: Chips are the “brain” of AI toys, directly determining the performance of the products. Currently, the chips used in AI toys mainly include various technical routes such as GPU, TPU, FPGA, and ASIC. Domestic chip companies such as Cambricon have made certain breakthroughs in the AI chip field, but high-end chips still mainly rely on international manufacturers such as NVIDIA. Sensors are the “sensory system” of AI toys, including various sensors for sound, image, touch, etc. Domestic companies such as Goertek and Weir have strong competitiveness in this field.
Software and Technology: The core software of AI toys is large model technology and algorithms. In 2024, the cumulative number of public cloud large model calls in China reached 114.2 trillion tokens, with Volcano Engine holding a 46.4% market share, followed by Baidu Cloud, Alibaba Cloud, and other giants. These software technologies enable AI toys to achieve advanced functions such as natural language processing, emotional computing, and knowledge graphs.
IP Licensing: IP is a key factor in enhancing the added value of AI toys. In 2024, the total number of IPs engaged in licensing business in China reached 2,758, a year-on-year increase of 11.1%. In the merchandise licensing business, toys and games ranked first with an 18.3% share. Strong IP resources can significantly enhance the market appeal and user stickiness of products.

Core Links and Representative Enterprises in the Upstream of the AI Toy Industry Chain

3.2 Midstream Manufacturing and Design

The midstream of the AI toy industry chain includes product design and manufacturing, covering the R&D and production of various AI toy products:

Diversification of Product Forms: The current market for AI toys mainly includes smart dolls, robot toys, AI plush toys, AI anime IP toys, and AI accessory toys. These products can be divided into three categories: basic, mid-range, and high-end, depending on target users and functional positioning.
Clear Price Segmentation: Basic AI toys are priced between 300-400 yuan, mainly providing basic functions such as AI large model dialogue; mid-range toys are priced around 2,000 yuan, adding features such as dynamic eyes and emotion recognition; high-end toys are priced above 10,000 yuan, featuring complex programming and highly anthropomorphic interaction functions. In terms of market sales share, high-end AI toys have a larger share, while basic AI toys have a larger share in terms of market sales volume.
Regional Concentration of Manufacturing Enterprises: Key AI toy enterprises in China are mainly concentrated in Guangdong, Beijing, and Shanghai, especially in Guangdong, where leading companies such as Aofei Entertainment, Xinghui Entertainment, Shifeng Culture, Gaole Co., and Yue Ran Innovation are clustered. These regions have a complete industrial support system, advanced production technology, and mature market promotion strategies, forming a significant industrial cluster effect.

3.3 Downstream Sales and Application Scenarios

The downstream of the AI toy industry chain mainly includes sales channels and application scenarios:

Diversification of Sales Channels: Online channels mainly include e-commerce platforms and second-hand trading platforms; offline channels mainly involve physical store sales. Since 2025, social e-commerce platforms such as Douyin have become important sales channels for AI toys, with Bubblepal’s sales on Douyin alone exceeding 20 million yuan.
Continuous Expansion of Application Scenarios: The application of AI toys is expanding from a single focus on children’s entertainment to diverse companionship needs. The children’s market is the core battlefield for AI toys, primarily addressing pain points such as the lack of companionship in dual-income families and insufficient personalized early education; the adult market is growing rapidly, mainly meeting the emotional relief and social compensation needs of urban populations; the elderly market is still in its infancy but has huge potential, primarily addressing emotional loneliness and health monitoring needs of empty-nest elderly individuals. This coverage of application scenarios across all age groups greatly expands the market boundaries.

Table: Market Characteristics and Demand Analysis of Different Application Scenarios for AI Toys

Application Scenario	Core Demand	Product Characteristics	Market Stage
Children’s Market	Educational enlightenment, daily companionship, transitional responsibility education	Combining educational content, high safety requirements, simple interaction	Mature stage, intense competition
Adult Market	Emotional relief, social compensation, interest development	Personalized design, strong technological feel, emphasis on privacy	Growth stage, rapid increase
Elderly Market	Emotional comfort, health monitoring, emergency assistance	Simple operation, integrated health functions, age-friendly design	Infancy stage, great potential
Special Groups	Therapeutic assistance, skill training	Strong professionalism, high degree of customization	Niche market, high social value

4 Competitive Landscape and Corporate Strategy

4.1 Market Competitive Landscape

The Chinese AI toy industry presents a diversified competitive landscape, with major participating enterprises divided into four types:

Traditional Toy Manufacturers: Represented by Aofei Entertainment, Shifeng Culture, Gaole Co., and Xinghui Entertainment, these companies leverage mature manufacturing capabilities and rich IP resources to accelerate their layout in the AI toy field. They typically adopt a “technology + IP” model to enhance product premiums, such as Aofei Entertainment establishing a dedicated AI toy division and collaborating with universities to create joint laboratories focused on AI + IP application product R&D, with the revenue share of AI toy business continuously increasing. Shifeng Culture has formed a deep partnership with Baidu Smart Cloud, launching voice-interactive products such as AI Magic Star and AI Feifei Rabbit, and providing AI upgrade technical support for Xiaodu Bear.
Technology Startups: Represented by Yue Ran Innovation (Haivivi), FOLOTOY, etc., these companies focus on niche scenarios such as emotional companionship and interaction, creating differentiated products through software and hardware integration and large model adaptation. Yue Ran Innovation’s flagship product BubblePal is the world’s first AI toy, integrating multi-agent interaction and long-term memory technologies, enabling toys to have emotional responses and self-learning capabilities. These companies typically emphasize technological innovation and user experience, with quick response times.
Internet Technology Companies: Including ByteDance, Baidu, iFlytek, etc., these companies leverage large model technology advantages to cover a wide range of applications such as smart toys and educational tools, driving industry development. For example, ByteDance occupies 46.4% of the large model market through Volcano Engine, providing technical support for its AI toy layout. Baidu collaborates with toy companies through the Wenxin large model to provide AI technology solutions.
IP Reserve Companies: Represented by Talking Tom, Shanghai Film, etc., these companies explore AI toys that are highly integrated with IP based on rich IP reserves. For example, Talking Tom leverages its well-known IP advantage, with overseas business accounting for 76.82%, giving it a significant advantage in global operations.

4.2 Corporate Strategic Layout

From the strategic layout of representative enterprises, AI toy companies are striving towards technological deepening, product IP integration, emotional engagement, industrial collaboration, and global market expansion:

Technological Deepening: Companies generally focus on deeply embedding advanced AI technologies such as multi-turn dialogue, emotional feedback, and semantic recognition into products to enhance the intelligent interaction experience of toys. They are also actively exploring cutting-edge technologies such as edge model operation and multimodal interaction to expand application scenarios. For example, Rongxin Culture is accelerating the transformation of technological reserves into scenario-based applications, promoting the rapid market launch of self-developed AI interactive toys.
Product IP Integration and Emotional Engagement: Leveraging existing IP to create AI toys with unique personalities and emotional interactions has become an important direction, aiming to meet the emotional companionship needs of users across different age groups. For instance, Gaole Co. deepens its “toys + technology” dual-line strategy through mergers and acquisitions of IP resources and smart technologies. This strategy not only enhances product appeal but also extends product life cycles through IP operations.
Industrial Collaboration: Companies emphasize cooperation by signing strategic partnership agreements and collaborating with industry associations to integrate various advantageous resources, accelerating the innovation and industrialization process of products. Director He Yaqiong stated that the Ministry of Industry and Information Technology will encourage toy companies and AI technology companies to join forces, combining market demand insights with new technology integration applications.
Global Market Expansion: In terms of regional layout, most listed companies primarily focus their business overseas, with Shifeng Culture’s overseas business accounting for 61.47% and Talking Tom’s overseas business accounting for 76.82%. Companies utilize various methods such as influencer collaborations and a combination of online and offline strategies to enhance brand awareness and market influence, actively laying out the global market.

Table: Business Layout and Strategic Direction of Representative AI Toy Enterprises

Company Name	Business Characteristics	Core Technology/IP	Market Layout	Strategic Direction
Aofei Entertainment	Transformation from traditional toy manufacturer	Own IP + AI technology	Balanced domestic and international markets	Technology + IP model, establishment of AI toy division
Shifeng Culture	Transformation from traditional toy manufacturer	Collaboration with Baidu + AI technology	Primarily overseas business (61.47%)	Deep cooperation with Baidu Smart Cloud
Gaole Co.	Full-category toy manufacturing	GOLDLOK brand + IP resources	Nearly 100 countries globally	Toys + technology dual-line strategy, mergers and acquisitions
Yue Ran Innovation	Technology startup	BubblePal product + multi-agent	Primarily online channels	Focus on AI technology integration, online sales champion
Talking Tom	IP reserve company	Talking Tom IP + AI technology	Primarily overseas business (76.82%)	Expand AI toys leveraging IP advantages

5 Investment Logic and Risk Analysis

5.1 Investment Logic and Opportunities

Based on a comprehensive analysis of the AI toy industry, we summarize the following investment logic:

Short-term Focus on Policy Drivers and Performance Realization: With the upcoming release of the Ministry of Industry and Information Technology’s implementation plan to promote the adaptability of supply and demand for consumer goods, the AI toy industry will welcome a new round of policy dividends. It is recommended to focus on companies that align closely with policy directions and have clear performance growth expectations, such as those that have already realized AI toy business revenue and are continuously increasing their share. Additionally, industry exhibitions such as the Shanghai International Toy and Educational Equipment Exhibition in 2025 show that AI toy buyers are actively inquiring, making short-term performance promising.
Mid-term Focus on Core Links of the Industry Chain: In the AI toy industry chain, high value-added links are mainly concentrated in chips, large models, and IP operations. It is advisable to pay attention to upstream companies with core technological barriers, such as domestic AI chip design companies and sensor manufacturers, as well as midstream toy manufacturers with strong IP integration capabilities and technological innovation. According to Northeast Securities research reports, domestic AI toys have significant advantages in manufacturing costs, R&D cycles, iteration speeds, and supply chain integrity, which will gradually translate into market competitiveness.
Long-term Layout for All-Age Market Pioneers: As the application scenarios of AI toys expand from the children’s market to adults and the elderly, companies that lay out the all-age market in advance are expected to gain long-term growth momentum. Professor Wu Yin from the School of Economics at Southwest University of Finance and Economics points out that due to changes in population structure, traditional toys face long-term growth pressure, and the AI transformation has become a key path to break through industry bottlenecks. Companies that can develop targeted products for different age group needs will occupy advantageous positions in future market competition.

5.2 Risk Factors and Prevention

While investors focus on opportunities in the AI toy industry, they should also be aware of the following risk factors:

Technological Iteration Risk: AI technology is evolving rapidly, and today’s leading technology may soon be replaced by the next generation of technology. Huazheng Securities’ research report indicates that the AI toy market will evolve under continuous technological upgrades, with products iterating along the path of “toys – AI + toys – AI toys – multimodal-driven emotional interaction carriers.” If companies cannot keep up with technological developments, they may fall behind in competition. Investors should pay attention to companies that maintain continuous R&D investment and have good partnerships with leading technology firms.
Market Competition Intensification Risk: As more companies enter the AI toy sector, market competition is becoming increasingly fierce. As of June 2025, the number of existing/operating AI toy companies in China reached 1,766. Although the rapid market growth provides space for multiple companies, price wars and homogenization competition may compress corporate profits. For instance, the traditional plush toy industry has faced price war dilemmas, with ordinary dolls priced below 20 yuan and profit margins below 3%. Investors should choose companies with differentiated competitive advantages, brand premium capabilities, and cost control abilities.
Data Security and Privacy Protection Risks: AI toys collect a large amount of user data, including voice, video, and personal information, making data security and privacy protection significant issues. The Ministry of Industry and Information Technology has also stated that it will work with relevant departments to strengthen assessments while guiding toy companies to enhance technical protections and timely research and formulate relevant standards to ensure the quality and safety of AI toys and data privacy. Investors should focus on companies that have strict measures in data security and meet or exceed regulatory requirements.
Market Demand Below Expectations Risk: Despite the broad market prospects, AI toys, as relatively new products, still require time to cultivate consumer acceptance. If market demand falls short of expectations, it may lead to inventory buildup and cash flow difficulties for companies. Huazheng Securities’ research report also highlights the risk of market demand falling short of expectations. Investors should pay attention to companies with rich product lines, precise market positioning, and multi-channel marketing capabilities.

6 Conclusion and Investment Recommendations

In summary, the AI toy industry is entering a golden development period driven by multiple factors, including policy support, technological advancement, consumption upgrades, and advantages in the industrial chain. According to data from the Ministry of Industry and Information Technology, the market size of AI toys is expected to reach 29 billion yuan by 2025, with significant growth potential in the future. For investors, this field offers abundant investment opportunities, but they must also be cautious of related risks. Based on this, we propose the following investment recommendations:

For Investors with Different Risk Preferences:

Conservative Investors: It is recommended to focus on industry-leading companies with strong cash flow, mature IP resources, and diversified product layouts, such as Aofei Entertainment (002292) and Talking Tom (300459). These companies typically have stronger risk resistance and market volatility tolerance.
Growth-Oriented Investors: Focus on technology-driven startups and related listed companies with clear market positioning, such as Yue Ran Innovation (not listed, but pay attention to related concept stocks) and Shifeng Culture (002862), which has deep cooperation with Baidu and other large model companies. These companies may have higher growth elasticity.

Investment Strategies for Different Links of the Industry Chain:

Upstream Links: It is advisable to focus on leading companies in the fields of AI chips (such as Cambricon), sensors (such as Goertek and Weir), and large model technology (such as Baidu and Volcano Engine). These links have high technological barriers and significant value contributions.
Midstream Links: Focus on toy manufacturers with strong product definition capabilities, IP operation capabilities, and channel advantages, such as Aofei Entertainment and Xinghui Entertainment (300043).
Downstream Links: It is recommended to pay attention to sales channel providers with layouts in emerging channels (such as social e-commerce) and emerging markets (such as sinking markets and overseas markets).

Long-term Investment Themes:

Silver Economy Theme: With the aging population, the market potential for AI companionship toys targeting the elderly is enormous. Attention should be paid to companies that have laid out the elderly market in advance.
Emotional Economy Theme: The demand for emotional companionship is growing across all age groups, and attention should be paid to companies with unique advantages in product emotional interaction design.
Globalization Theme: Chinese AI toy companies have cost advantages and industrial chain advantages in the global market, and attention should be paid to companies with high overseas revenue proportions and strong global operational capabilities.

Overall, the AI toy industry is in a period of rapid development, and it is expected that a number of globally competitive enterprises and brands will emerge. Investors should closely monitor industry policy changes, technological breakthroughs, and market trends, combining their own risk preferences to seize investment opportunities in this emerging field. At the same time, they should also be vigilant about risks related to technological iteration, market competition, and data security, and manage investment portfolio risks effectively.