<p>Promoting the upgrading of the value chain in the equipment manufacturing industry is a crucial strategy for China to address the current challenge of being “big but not strong” in this sector, and to establish itself as a manufacturing powerhouse. As a general-purpose technology, artificial intelligence (AI) has emerged as a new engine driving value chain upgrades in equipment manufacturing industry. However, the mechanisms through which AI influences this upgrade remain unclear. Utilizing panel data from 30 Chinese provinces spanning 2010 to 2022, the paper investigates AI’s impact on value chain upgrading in the equipment manufacturing industry and its underlying mechanisms. The findings indicate that: (1) AI promotes value chain upgrading in the equipment manufacturing industry, the conclusion that remains robust after a series of stability tests and discussions on endogeneity. (2) AI exerts a significant positive impact on value chain upgrading in both eastern and western regions, while its effect on central regions is insignificant. AI significantly enhances value chain upgrading in capital-intensive and technology-intensive equipment manufacturing industry, yet it has a significant negative influence on labor-intensive equipment manufacturing industries. (3) AI facilitates value chain upgrading in the equipment manufacturing industry through two channels: enhancing human capital levels and driving product research and development (R&amp;D). Production scale positively moderates both the human capital mechanism and the product R&amp;D mechanism of AI. This paper elucidates the mechanisms by which AI facilitates value chain upgrading in the equipment manufacturing industry, uncovers new evidence of AI’s heterogeneous impact on this upgrading, and provides policy implications for formulating measures to promote value chain upgrading in China’s equipment manufacturing industry</p>