Generative artificial intelligence (GAI) is rapidly becoming ubiquitous in many contexts. There is limited scholarship, however, in the fields of Developmental Psychology and Early Childhood Education exploring the implications of generative AI for babies and young children. In this Perspectives piece, we discuss potential use cases, opportunities, and risks for the application of AI in early childhood. Our insights are informed by extensive discussion with stakeholders and by desk research carried out in our roles as academics and analysts in a social innovation foundation. Our aim is to stimulate nuanced and informed discourse on the topic of generative AI in early childhood that can inform innovation in both research and practice.