Artificial intelligence is increasingly framed as a catalyst for achieving the Sustainable Development Goals, yet its global deployment is shaped by the strategic interests of dominant technology players, particularly the United States and China. AI-powered infrastructure projects, from China’s Digital Silk Road to Western-led digital public goods initiatives, are being introduced in the Global South under the banner of development, often without sufficient scrutiny of their long-term implications. While these initiatives promise to enhance digital inclusion, governance efficiency, and economic growth, they also risk creating new forms of technological dependency. In this chapter we examine how AI, when embedded in digital identity systems, smart cities, financial services, and governance tools, is reshaping national sovereignty and economic autonomy. Through theoretical foundations of critical development methodology, institutional analysis and incomplete information contract, the chapter examines data and empirical cases of AI adoption in Africa and Asia to highlight how reliance on externally controlled AI ecosystems can influence local policy priorities, reinforce power asymmetries, and facilitate data extraction as a resource. While AI has the potential to accelerate progress toward the SDGs, its deployment often entrenches economic dependencies that could constrain long-term development. The chapter argues for a development framework that prioritizes open AI models, decentralized digital infrastructures, and policy innovation to ensure AI supports, rather than dictates SDG outcomes. It proposes policies for balancing AI adoption with national economic interests, emphasizing the need for policy autonomy, multi-stakeholder governance, and strategic investment frameworks. We foreground SDGs 10, 16, and 17 to show how weak digital sovereignty can widen inequalities, erode institutional accountability, and skew partnerships, and we propose contractual, infrastructural, and governance reforms to reverse these effects. By advancing an alternative vision of AI-driven development, this chapter highlights the importance of ensuring that AI strengthens local agency rather than deepening external technological hegemony.