Sep 22, 20265 min read

The Toy Industry Is Betting Big on AI

By Curio Team

For a few years, it was looking pretty dark for the toy industry; sales were slipping, and prices were only rising. Maybe dramatic, but some people were wondering if it was over for physical toys, and that all kids wanted these days was a console or a tablet. Then 2025 happened. For those who don't know, 2025 was a huge year for the toy industry, where they actually saw growth instead of decline for the first time in years. At the same time, a new type of toy entered the market and shook up everything.

AI toys aren't a fringe idea or a gimmick anymore, and they are here to stay. As AI advances, global companies are pouring money into AI toys. In this guide, we'll cover the toy market as a whole and why the whole world is staring at AI toys.

The Toy Industry Is Growing Again

Before talking about AI toys, let's address the toy industry as a whole. According to Circana, the company that tracks toy sales around the world, the global toy industry reached $123 billion in annual sales in 2025, growing 8% over the year before. That growth was not localized in the United States; it also came from Asia and Oceania, which actually showed the most growth.

The biggest boost in the toy industry came from collectibles, which grew 32% and now make up almost 19% of toy sales worldwide. Pokémon was the number one toy property in the world, followed by Hot Wheels, Marvel, Barbie, and Star Wars. Circana's global toys advisor also pointed out that toys are seen as fun, screen-free, and social, meeting a growing desire for wellbeing. That's exactly the gap AI toys fill.

Where AI Fits In

AI toys serve a not-so-niche group of parents who want their kids' toys to be more engaging, but don't want them staring at screens all day. That's where a talking plush or robot comes in.

The markets are reflecting this need. One estimate from the research firm IMARC Group puts the global AI toy market at $18.1 billion in 2024, growing to $60 billion by 2033.

Keep in mind, what classifies a toy as AI is different depending on who is reporting. Some say coding robots and app-connected games count, and others only list toys that can hold a conversation. No matter how you slice it, they are all growing.

Tech Giants Are Trying To Join

The biggest sign that AI toys are the future is how much the biggest names in toys and tech are investing in this technology.

In June 2025, Mattel, the company behind Barbie and Hot Wheels, announced a partnership with OpenAI to bring AI into its products.

One thing about bigger, legacy companies is that they act very carefully. In December 2025, Mattel said it wouldn't release its first OpenAI-powered toy by the end of the year, as originally planned. Another thing is that it won't be targeting young children, since OpenAI's products are limited to ages 13 and up. That caution tells you that AI toys are hard to make, and even harder to make right.

In Asia, though, tech giants are doubling down. Huawei sold more than 10,000 units of its AI plush in its first week. The emotional-support plush "Smart Hanhan" retails for around 399 yuan, around $57. And it's not just Huawei; JD.com and UBTech are jumping in too.

A Global Race

You are probably thinking that the Asian market is ahead compared to the West when it comes to AI toys, and depending on who you ask, you'd be right. At CES 2026 in Las Vegas, about 60 AI toy and companion robot companies exhibited, and more than 80% of them were Chinese.

China is the biggest player right now; there is a large demand, and they already dominate electronics. What's surprising is that in China, it's not just kids buying AI companions; it's also young adults and the elderly.

Japan has a long history with robots and made some of the very first robot toys. To nobody's surprise, they are still pioneering the category. One of the most popular AI companions in Japan is Moflin from Casio (yes, the watch company), which is a palm-sized, fluffy AI pet that responds to voice and touch.

What makes Moflin such a standout product is the fact that it can develop over 4 million different personality traits and recognizes the person it spends the most time with. That's truly advanced, and it's what makes no two Moflins the same.

Japanese buyers loved it. After Casio launched Moflin, it beat its sales goal, selling more than 7,000 units by March 2025. Interestingly, some of its biggest fans in Japan are women in their late 30s and 40s, which brings it back to the idea that AI toys aren't just for children.

For more about AI toys around the world, check out our full blog (here).

What This Means for Families and the Future of Play

For children, AI toys are just becoming a normal part of play. For parents, there are more options than ever and more reasons to choose carefully with each toy. If your family already has a smart speaker at home, you might be wondering where an AI toy even fits. We break down the key differences in our blog (here).

And the toys are only getting more advanced. At CES 2026, one company showed off Sweekar, an AI pocket pet that physically grows through stages, from egg to baby to teen, then adult. It can even simulate body warmth and gentle breathing to feel more lifelike. To see more of the most advanced AI toys and where play is headed next, stay tuned for our full blog (launching soon).

Conclusion/TL;DR

So what does the toy market look like right now? Overall, it's growing, mostly in collectibles, but AI toys are carving out a small piece of it too. American companies like Mattel are taking it slow, while Asian companies are diving headfirst into AI toys. For parents, the best thing they can do is keep up with where the market is headed, because the toys of today will look totally different tomorrow.