Artificial intelligence (AI) is ushering in a transformative technological revolution with profound implications across industries and societies. To remain competitive in this rapidly evolving landscape, nations must prioritize the development of world-class AI capabilities within their higher education systems. However, Arab countries currently face significant gaps in AI research output, talent development, and skills cultivation compared to global leaders. This study provides an objective assessment of the challenges confronting Arab universities in AI, benchmarked against international standards and best practices. It proposes a comprehensive strategy to foster AI excellence by addressing critical pillars: cutting-edge research and innovation ecosystems, advanced AI education and curricula, robust talent pipelines from K-12 to professional levels, and enhanced global collaboration and knowledge exchange. Key focus areas include strengthening AI research and development funding, fostering industry–academia partnerships, integrating AI across academic disciplines, establishing foundational AI pathways in early education, attracting top-tier AI faculty, and promoting global talent mobility. The discussion culminates in a holistic roadmap for implementing national AI strategies, sustainable funding models, capability development frameworks, and integrated AI ecosystems. By adopting the outlined recommendations, Arab institutions of higher education can bridge existing gaps and position themselves as global leaders in AI innovation and human capital development. Achieving this vision, however, will require sustained commitment, strategic coordination, and significant investment, reflecting the immense opportunities that lie ahead in the age of artificial intelligence.