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Abstract This chapter explores how artificial intelligence (AI) is reshaping the digital transformation (DT) of organizations, marking a profound shift in how knowledge, cognition, and decision-making are distributed between humans and machines. It conceptualizes AI as an emergent family of technologies that autonomously extract and codify knowledge from data, thereby extending automation into the cognitive domain. This chapter traces the historical evolution of AI—from early expert systems and supervised learning to the transformative rise of generative AI—and highlights its increasing role as a general-purpose technology driving cross-sectoral innovation. By contrasting AI with traditional digital technologies, it demonstrates how probabilistic reasoning, self-learning, and adaptive capabilities allow AI systems to generate novel solutions and act as autonomous agents within organizations. Particular attention is devoted to the generative AI paradigm, which introduces multimodal and interactive systems capable of producing text, images, code, and other outputs, thereby democratizing access to advanced AI capabilities and accelerating digital innovation. This chapter also examines the organizational implications of AI integration, including new forms of human–AI collaboration, changing expert roles, and the emergence of “co-intelligence” in decision-making. Finally, it discusses the risks, ethical challenges, and barriers associated with AI-based transformation—ranging from environmental and privacy concerns to governance and trust issues—arguing that sustainable value creation from AI requires responsible adoption, transparency, and human-centered integration.