The rapid development of artificial intelligence (AI) is transforming higher education, employment, and entrepreneurship by extending technological capabilities beyond communication and information management to include analysis, content generation, problem-solving, prediction, ideation, feedback, and decision-making. This study examined how AI capabilities contribute to students’ entrepreneurial competencies, with particular attention to the mediating roles of knowledge management and entrepreneurship education. A quantitative descriptive-correlational research design was employed using structural equation modeling (SEM) and SmartPLS 3.0. The participants consisted of university students in Markazi Province, Iran, from whom 237 students were selected through purposive sampling. Data were collected using a standardized questionnaire. Content validity was established through expert review by eight faculty members and specialists, while convergent and discriminant validity were assessed using factor loadings, average variance extracted (AVE), cross-loadings, and the Fornell–Larcker criterion. Reliability was evaluated using Cronbach’s alpha and composite reliability. The structural model results supported all eight research hypotheses. Findings indicated that AI capabilities were positively related to students’ entrepreneurial competencies, both directly and indirectly through knowledge management and entrepreneurship education. The results suggest that the entrepreneurial benefits of AI depend not only on technological access but also on its integration with effective knowledge management and educational processes. Therefore, universities should position AI as an enabling resource rather than a substitute for instructors or students. Integrating AI-supported knowledge acquisition and creation with knowledge management and entrepreneurship education can strengthen students’ technological, cognitive, and entrepreneurial capabilities and support the transformation of knowledge into entrepreneurial action and value creation.