This chapter examines the concept of ‘AI Anxiety’ in Higher Education (HE), following the widespread introduction of Generative AI (GAI) technologies since ChatGPT’s launch in November 2022, with common and distinct patterns emerging between contexts in the Global North and Global South. ‘AI Anxiety’ here represents a complex emotional response including fears about job displacement, loss of control, and ethical concerns. Particularly in universities, these anxieties appear through worries about academic integrity, assessment practices, teaching methods, and research approaches. The opaque nature of AI systems and sensationalist media portrayals have deepened misconceptions about what these technologies can actually do. AI literacy offers a key response to these challenges. Beyond technical skills, comprehensive AI literacy includes understanding core concepts, ethical implications, and critical evaluation of AI strengths and limitations. Institutional approaches that emphasise AI literacy can reduce anxiety while promoting thoughtful and sceptical engagement with these technologies. Success requires culturally-aware strategies that acknowledge regional differences and address underlying concerns through education, ethical frameworks, and supportive environments.