Artificial Intelligence (AI) plays an important role in higher education, leading to both significant opportunities and notable challenges. This chapter describes how higher education and academic practices are reshaped by AI technologies in both positive and negative ways. There are number of key technologies, such as Natural Language Processing (NLP), machine learning, and predictive analytics, that are involved in AI innovations in higher education. These advancements have resulted in tools for unique contents generation, adaptive learning systems catering for an individual’s need, and intelligent tutoring systems. Advanced Virtual Reality (VR) and Augmented Reality (AR) tools have made learning environments more interactive. One of the key advancements is distance-learning education, and a practical example of its use was the Covid-19 pandemic when intelligent tutoring systems played an important role. Future directions of AI in the learning environment promise further enhanced systems, such as advanced language-understanding tools, next-generation adaptive learning systems, and immersive and interactive learning systems focusing on AR. However, in order to make AI successful in higher education, strategic planning and AI-integration roadmaps are required. Furthermore, AI-driven higher education will have a long-term impact on teaching and learning which requires strategic development and planning. Opening of new employment opportunities in the fields of robotics is another positive impact on society. Despite the positive impacts, AI has some risks associated with its inclusion in higher education. The most important of them are data privacy and ethical challenges where security of personal data is concerned. Implementation and integration challenges, technical barriers and institutional resilience must be carefully handled. Moreover, academic employment, potential job displacement, and the educator’s role need to be defined. This chapter also proposes that there should be balance between innovation and risk management. Policy guidelines and governance frameworks must be established for effective use of AI in order to reduce ethical and data privacy issues. Equity-based AI policies and resources must be supported for students to provide an inclusive educational environment. To summarize, whereas AI provides transformative opportunities for higher education, it also introduces challenges and risks where careful integration is required to maintain a balance.