Cover Launched in 1996, Tamagotchi is one of the earlier digital pets and has paved the way for more sophisticated AI toys (Photo: Getty Images)
Launched in 1996, Tamagotchi is one of the earlier digital pets and has paved the way for more sophisticated AI toys (Photo: Getty Images)
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The market for interactive companions has exploded beyond simple electronic pets into a diverse ecosystem of AI-enhanced friends. Are these smart toys the solutions to loneliness, or merely commercialising it?
There was a time when the egg-shaped digital virtual pet toy known as Tamagotchi dangled from schoolbags, while Furbies chattered incomprehensibly on bedroom shelves. What started as a quirky footnote in consumer electronics from the nineties has matured into a massive global industry.
An AI toy, at its core, is a physical plaything embedded with artificial intelligence—software that learns, adapts and responds to interaction. Unlike traditional toys that perform preset actions, AI toys use sensors, voice recognition and machine learning to develop unique personalities, remember past interactions, and evolve their behaviour based on how you treat them. However, the industry broadly labels these smart toys as ‘AI toys’, though the term encompasses everything from programmable smart toys like classic Furby to genuine machine-learning products.
In September 2025, global research company Market Research Future (MRFR) published a report stating that the market size of toys powered by AI is expected to grow from US$42.15 billion in 2025 to US$224.75 billion in 2034. Asia-Pacific markets are demonstrating the steepest growth curves, reflecting longstanding cultural comfort with anthropomorphised technology. Japan pioneered this category and continues to lead in innovation, while China’s manufacturing capacity and domestic appetite are reshaping the competitive landscape.
Read more: Can AI replace your therapist?
Above First released in 1998, the electronic furry animal Furby is manufactured by American games and toy company, Hasbro (Photo: Getty Images)
First released in 1998, the electronic furry animal Furby is manufactured by American games and toy company, Hasbro (Photo: Getty Images)
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With remote work common, delayed family formation and higher housing costs pushing people into smaller homes, millions are turning to artificial companions as a surprising source of comfort and fun. The rise of AI companions isn’t just about clever technology—it’s responding to a genuine social crisis, built on our fundamental need for a little non-judgmental company. The segment for AI companions is broad and includes apps like Microsoft’s Xiaoice, also known as Xiaobing, but here we focus specifically on physical AI toys—tangible products you can hold, cuddle or display.
Surveys indicate that roughly one in eight users explicitly sought these toys to address loneliness, whilst a similar proportion used them for mental health support. Harvard Business School researchers published findings in the Journal of Consumer Research showing digital relationships deliver measurable, if modest, reductions in loneliness—meaning it’s palliative rather than curative.
Below, we rounded up a few of these toys.
Tamagotchi
Above Tamagotchi is an egg-shaped digital pet with three tactile buttons for the user to feed, clean and play with their pet (Photo: Getty Images)
Tamagotchi is an egg-shaped digital pet with three tactile buttons for the user to feed, clean and play with their pet (Photo: Getty Images)
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The classic digital pet is back and more connected than ever. The appeal of the Tamagotchi has always been rooted in ritual and responsibility. At its core, the routine of feeding, cleaning, playing is disguised as play—perfect for those who find comfort in structured obligations.
The new Tamagotchi Uni version launched in July 2023 keeps this central loop of care, but adds WiFi to connect with friends in the “Tamaverse”.
The first version of Tamagotchi made its debut in 1996, and since then, a total of about 100 million units of this digital pet and its various iterations have been sold worldwide.
Read more: Did Netflix’s ‘3 Body Problem’ and ‘Black Mirror’ really predict our future? Tech experts weigh in
Furby
Above Made by Hasbro, Furby is a robot toy that interacts with its user (Photo: Hasbro)
Made by Hasbro, Furby is a robot toy that interacts with its user (Photo: Hasbro)
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Furby remains the elder statesman of robotic companions. The latest iterations feature more sophisticated sensors and voice recognition than their 1998 ancestors, but they’ve retained that trademark unpredictable personality that made them legendary. They’re still chatty, develop personality quirks you didn’t programme, and now integrate app connectivity for expanded interactions.
It generally behaves like an autonomous creature, making it companionship, but on its own terms.
Moflin
Above Casio’s Moflin is an AI robot plaything that is designed to provide support for its owner (Video: Casio)
Japan’s answer to emotional support animals comes wrapped in synthetic fur with adaptive AI underneath. Moflin is the rabbit-like creature by tech behemoth Casio that responds to touch with subtle movements and develops unique personality traits based on interaction patterns.
Unlike other AI toys, Moflin prioritises calming presence. It’s designed for anxiety reduction, with tactile feedback carefully calibrated for sensory comfort. The technology is sophisticated: emotion recognition, learning algorithms, responsive behaviour. It’s therapeutic companionship, productised and priced accordingly at several hundred dollars.
Read more: Meet Moflin, Casio’s emotional support robot, and other AI companions
Fuzozo
Above Fuzozo is an interactive AI toy by Agora that aims to boost emotional learning (Video: Go Go Study)
Exploding out of the hyper-competitive Chinese market, Fuzozo is tech company Agora’s answer to AI companionship merged with collectible culture. Launched at SuperAI, it’s an emotionally intelligent pet but wearable as a plush pendant.
Built using Agora’s ConvoAI Device Kit, it features voice, vision and emotion synchronisation designed to bond and evolve with users through real-time emotional interaction.
This furry companion develops a unique personality the more you interact with it. According to a statement from the company, it can respond in its own Fuzozo language, even showing hints of jealousy and affection. Marketed as the “AI version of Labubu”, its immense popularity comes from blending the collectible, shareable aesthetic with deep, adaptive interaction.
What’s next for the industry?
If projections hold and the market grows exponentially, we expect to observe a significant consumer category rather than a niche curiosity. That scale will attract serious capital and competitors.
Traditional toy maker Mattel is already playing catch up. Earlier in June 2025, alongside OpenAI, it announced a strategic collaboration to support AI-powered products and experiences based on its brands. When established players like Mattel—maker of Barbie, Hot Wheels and Polly Pocket—invest in AI partnerships, it validates the category. The collaboration suggests mainstream toy aisles will soon feature AI-powered products alongside traditional toys.
Several questions, however, remain unaddressed: data privacy for products learning from intimate interactions, psychological dependency risks for young users, and whether consumer protection frameworks built for physical products translate to AI relationships.
Whether these products are a temporary way of bridging social reconnection or permanent substitutes for increasingly complicated human relationships remains unclear. The market appears agnostic, ready to serve demand wherever it materialises.
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Work
Based in Singapore, Valerie Lim is the digital editor for Tatler Power and Purpose, Tatler Asia’s dynamic platform spotlighting industry leaders across the region. Valerie leads the charge in shaping the platform’s digital presence, from overseeing and producing website content to curating social media strategies.
With a finger on the pulse of the region, she keeps an eye out for news and trends in business, innovation and leadership, ensuring the brand stays ahead of the curve in delivering stories that inspire and inform its community of changemakers.
About
Prior to this role, she worked in marketing and communications. She considers herself Singaporean at heart and international by passion. You may recognise her from her 15 minutes of fame when she was crowned Miss Universe Singapore 2011. When she is not at her desk, you can find her in the gym or at a yoga studio.
Connect with her via Instagram @msvalerielim, LinkedIn or send press materials, and media invites to valerie.lim@tatlerasia.com
