2025: The Boom and Challenges of AI Toys Capital Influx, Technological Bottlenecks, and Business Model Exploration

2025: The Boom and Challenges of AI Toys Capital Influx, Technological Bottlenecks, and Business Model ExplorationAt the beginning of 2025, the wave of artificial intelligence (AI) has swept through the toy industry, becoming a new focus of the capital market. Compared to the emergence of disruptive applications like Super APPs, empowering traditional industries with AI has become a current strategic priority, and AI toys are the trendsetters in this wave

2025: The Boom and Challenges of AI Toys Capital Influx, Technological Bottlenecks, and Business Model Exploration

At the beginning of 2025, the wave of artificial intelligence (AI) has swept through the toy industry, becoming a new focus of the capital market. Compared to the emergence of disruptive applications like Super APPs, empowering traditional industries with AI has become a current strategic priority, and AI toys are the trendsetters in this wave. Entering 2025, the stock prices of several listed companies, including Shifeng Culture and Guanghe Tong, have surged significantly due to the dynamics of their AI toy businesses, fully reflecting the capital market's attention and expectations for this field. This market enthusiasm has spread rapidly, attracting numerous companies and investment institutions to actively participate.

• According to interviews conducted by reporters from the Science and Technology Innovation Board Daily, some serial entrepreneurs have keenly captured this business opportunity. They swiftly completed company registration, supply chain construction, and resource docking before the Spring Festival, making full preparations to seize the market after the holiday. At the same time, many listed companies have also seen the huge potential of AI toys from the trend of individual stocks in the secondary market, actively seeking partners to achieve dual growth in both business and stock price.

Capital's Bet and the Underlying Logic

• "The market's enthusiasm for AI toys remains high," a serial entrepreneur told a reporter from the Science and Technology Innovation Board Daily, stating that their AI toy startup project secured angel round financing shortly after its direction was determined. Regarding the capital's favor, the entrepreneur believes the logic is clear: Firstly, the current capital market is actively seeking future blockbuster products in the AI field, and the recent heat of AI toys in the secondary market is being transmitted to the primary market; secondly, compared to AI applications such as embodied intelligence, AI toys have a clearer business model, lower implementation threshold, and lower trial-and-error costs. Therefore, for investment institutions that have already invested in a batch of AI projects requiring long-term cultivation, investing in AI toys is a relatively easy decision.

An investor pointed out to the reporter that the greater value of toys lies in IP, and the success of Pop Mart has already proven this point. The market is expecting whether the "AI + Pop Mart" model can bring greater imagination.

Market Landscape and Case Studies

Currently, the smart toy market covers several sub-sectors, including education, entertainment, and companionship. Many companies were established before the breakthrough development of generative AI and have received funding from venture capital (VC) and private equity (PE). Notably, since 2024, the financing speed of these companies has significantly accelerated.

For example, Mengyou Intelligent attracted significant attention with its AI robotic pet Ropet showcased at CES. Founded in March 2022, the company's core team members come from renowned universities and companies such as Stanford University, Baidu, Alibaba, Xiaomi, and NIO. Business information shows that Mengyou Intelligent completed Series A and B financing in 2024, both funded by Zhenzhi Venture Capital.

Similarly showcasing AI bionic pet toys is Elephant Robotics. Data from Cailianpress Venture Capital shows that Elephant Robotics was founded in August 2016 and has completed four rounds of financing, two of which were completed in 2024. Investors include Zhenge Fund, Shenzhen Venture Capital, Qinghui Investment, and Yunzhuo Capital. Elephant Robotics collaborates with the large model solution provider, Mianbi Intelligent, applying on-device models to bionic pet products, enabling them to understand natural language and respond without network dependence or complex hardware modifications.

Yue Ran Innovation, founded in 2021, has also attracted attention with its external AI pendant, BubblePal. Data from Cailianpress Venture Capital shows that Yue Ran Innovation has completed three rounds of financing, two in 2024, with investors including BlueRun Ventures, Sequoia Capital China Seed Fund, Huashan Capital, Joy Capital, and Qifu Capital.

Shifeng Culture's recent stock price surge led to its response to investor inquiries, stating that it had reached a cooperation agreement with Yue Ran Innovation to jointly explore the application of AI technology in the toy field and new business models. Previously, Shifeng Culture also partnered with Lingyou Zhixue, an educational hardware operator (which received investment from iQiyi in 2021).

Technological Thresholds and Challenges: Experience Enhancement and Supply Chain Improvement

Although the technical threshold for AI toys is relatively low compared to other sub-sectors, the user experience of AI toys on the market currently has significant room for improvement. Many newly entered traditional toy manufacturers' products have problems in performance and experience. Without sufficient optimization before mass production, they may face high return rates and a large number of negative reviews. This is also the reason why listed companies are eager to find partners: traditional toy manufacturers lack accumulation from content and IP to AI technology implementation, providing huge development space for startups.

Currently, AI solutions empowering traditional toys are mainly provided by hardware manufacturers, but these manufacturers lack large model fine-tuning capabilities, especially in aspects like intelligent agents and related prompts. Most AI toy suppliers cannot provide mature solutions.

The ultimate functionality of AI toys involves a three-layer architecture:

1. Terminal Hardware: Including high-precision sensors and low-power chips, supporting multi-modal interaction through voice, movement, and expression.

2. Cloud AI: Involving large language models and emotional computing engines, enabling personalized conversations and continuous learning.

3. Client-side Services: Including parental app management of subscriptions, data, and security permissions.

Industry insiders point out that hardware is not the key threshold for AI toys; the main technical differentiation lies in the AI aspect, including reducing latency through localized lightweight models and better voice, expression, and movement coordination to better respond to real emotions.

Business Models and Future Outlook: Subscription Services and the Emotional Economy

As a consumer-facing product (to C), AI toys can offer subscription services in addition to direct sales of terminal products. For example, AI toys for school-aged children can charge extra fees through subscription services for story packages embedded in functions like storytelling. For children's AI toys, the purchaser and the actual user are different, a characteristic not found in other types of products.

From a broader market perspective, AI toys still have rich development prospects, attracting long-term capital attention. The blue ocean market of the emotional economy, the added value of education technology integration, the concept of a metaverse gateway, and the possibility of further extension to AIoT are all reasons why AI toy manufacturers are worth long-term capital optimism.

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