Toys ‘R’ Them: Chinese AI toy market hits $14B as US giants move to keep up

AI-powered toys that can chat with children are rapidly gaining popularity in China and expanding into US markets. This emerging sector is projected to reach $14 billion by 2030 in China alone, with over 1,500 AI toy companies now operating there, while major US players like Mattel and OpenAI prepare to enter the competition with their own conversational toys later this year.

What you should know: Chinese companies are leading the AI toy revolution with products that transform ordinary stuffed animals into interactive companions.

• BubblePal, a ping-pong ball-sized device that clips onto stuffed animals, has sold 200,000 units since launching last summer at $149 each, powered by DeepSeek’s large language models.
• The device offers 39 different character voices through a smartphone app, from Disney’s Elsa to Chinese cartoon character Nezha.
• FoloToy takes a different approach, allowing parents to train plush toys to speak with their own voice and speech patterns, selling over 20,000 units in Q1 2025 alone.

The big picture: China’s AI toy boom builds on decades of educational electronics designed specifically for children, a market segment that doesn’t exist to the same extent globally.

• Companies like BBK popularized “study machines” and electronic dictionaries as early as the 1990s, creating a foundation for today’s AI-enhanced toys.
• According to Rui Ma, a China tech analyst at AlphaWatch.AI, “AI devices for children make particular sense in China, where there is already a well-established market for kid-focused educational electronics.”

Global expansion: Chinese AI toy companies are rapidly expanding beyond domestic markets.

• BubblePal launched in the US in December 2024 and is now available in Canada and the UK.
• FoloToy sells in more than 10 countries, including the US, UK, Canada, Brazil, Germany, and Thailand.
• However, FoloToy’s CEO Kong Miaomiao noted that outside China, the company is still just “reaching early adopters who are curious about AI.”

Competition heating up: Major US companies are entering the AI toy space with their own products.

• Musician Grimes helped create Grok, a plush toy that chats with kids and adapts to their personality.
• Toy giant Mattel is partnering with OpenAI to bring conversational AI to iconic brands like Barbie and Hot Wheels, with first products expected to be announced later this year.

What parents are saying: Reviews from Chinese parents reveal mixed experiences with current AI toy offerings.

• Penny Huang, who bought BubblePal for her five-year-old daughter: “The responses are too long and wordy. My daughter quickly loses patience. It [the role-play] doesn’t feel immersive—just a voice that sometimes sounds out of place.”
• Hongyi Li noted technical limitations: “Children’s speech is fragmented and unclear. The toy frequently interrupts my kid or misunderstands what she says. It also still requires pressing a button to interact, which can be hard for toddlers.”
• Despite hopes that AI toys would reduce screen time, Huang recently listed her BubblePal for sale, saying: “She wants to play with my phone more than anything else.”

Why this matters: The AI toy market represents a significant shift in how children interact with technology, potentially offering screen-free alternatives while raising questions about the effectiveness and longevity of current implementations as companies race to capture this emerging market.