This study presents a systematic review of the challenges and opportunities in adopting AI-powered Enterprise Resource Planning (ERP) systems within Small and Medium Enterprises (SMEs). The review focuses on how Artificial Intelligence (AI) technologies, including Machine Learning (ML), Generative AI (GenAI), and natural language processing (NLP), are integrated into ERP systems to enhance business processes in SMEs. Key opportunities identified include improved business intelligence, forecasting, automation, and personalization. These advancements offer significant potential for improving operational efficiency, decision-making, and competitiveness in resource-constrained SME environments. However, several challenges persist, such as limited technical expertise, high implementation costs, data integration complexity, security and ethical concerns. This review contributes to the growing body of knowledge on digital transformation in SMEs and offers valuable insights for researchers, policymakers, and business practitioners aiming to support AI-driven innovation in the ERP domain.