Artificial Intelligence (AI) is increasingly reshaping higher education by supporting communication, learning, and digital literacy development. This qualitative study explores how AI tools influence communication competence and digital literacy among university students in Bangladesh. Data were collected from 56 students through semi-structured online questionnaires, classroom observations, and post-observation reflective discussions. Thematic analysis shows that AI tools such as ChatGPT, Grammarly, translation applications, and AI-supported learning platforms help students improve grammatical accuracy, vocabulary use, clarity of expression, academic writing, and communication confidence. The findings also indicate that AI encourages self-directed learning and strengthens students’ ability to navigate digital platforms and solve academic problems. However, the study identifies challenges related to digital inequality, data privacy, algorithmic bias, academic integrity, and over-reliance on AI-generated content. The study concludes that AI can enhance communication competence and digital literacy when used as a complementary educational tool supported by ethical guidelines, faculty training, and equitable access.