Soul Machines, a company based in New Zealand, is paving the way for hyper-lifelike, virtual beings. Mark Sagar, the founder and CEO, has built a range of artificially intelligent characters that can learn, express emotions, and interact with humans.

But its most intriguing, and creepy, creation is BabyX, a virtual baby that sits in a high chair and has learned to read (a few words like apple, sheep, etc.), express emotions, and even tap the keys of a virtual piano, Bloomberg reports.

BabyX is not a computer program, Sagar says. BabyX runs off a complex neural network that Sagar and his employees built to work, and react, like the human brain. BabyX can respond to human's facial expressions and voice and a range of other stimuli. Bloomberg reports that BabyX is more like a "virtual circuit board" than a computer program.

"Virtual hits of serotonin, oxytocin, and other chemicals can be pumped into the simulation, activating virtual neuroreceptors. You can watch in real time as BabyX's virtual brain releases virtual dopamine, lighting up certain regions and producing a smile on her facial layer. All the parts work together through an operating system called Brain Language, which Sagar and his team invented."

Sagar, a computer scientist and artificial intelligence researcher and entrepreneur, worked in Hollywood for a while to create lifelike animations for movies like King Kong and Avatar, but he left the film industry in 2011 for the University of Auckland, where he launched the Laboratory for Animate Technologies. Soul Machines spun out of this research, which fused computer science, AI, neuroscience, and art.

BabyX is just one of Soul Machines' creations. Its first character released to the world is Nadia, a virtual assistant that uses IBM's speech recognition system in Watson and speaks with Cate Blanchett's voice. (The actor worked with Soul Machines to record hours of dialogue.) Nadia was developed to replace text-based chatbots for Australia's National Disability Insurance Agency website. Nadia will be an online helper for the country's 500,000 people with disabilities.

According to Bloomberg, Soul Machines is currently running 10 trials with companies, in industries ranging from health care, financial services, and airlines, to see if customers are comfortable enough to engage a virtual being. Further down the line of commercialization, Amazon, Apple, and Google might want to use Sagar's virtual beings to put a friendly and human-looking face on the voice-activated virtual assistants, Bloomberg reports.

Sagar, who wants to mimic human consciousness with his virtual beings, is after something much bigger than selling virtual assistants.

"We want to know what makes us tick, what drives social learning, what is the nature of free will, what gives rise to curiosity and how does it manifest itself in the world," Sagar tells Bloomberg. "There are these fantastic questions about the nature of human beings that we can try and answer now because the technology has improved so much."