Artificial Intelligence (AI) and the Internet of Things (IoT), are innovative technologies that have revolutionized many fields independently. Altogether, this convergence offers a daunting possibility for innovation of a number of aspects of smartness in a range of domains on the one hand and the optimization of those aspects for sustainability on the other hand. Machine learning and deep learning help IoT devices and networks perform analytics on big data and achieve real-time decision making and automation. In smart cities AI based IoT helps in the self-organizing and self-optimizing of traffic management, and utilization of energy, and increases public safety by applying predictive analytics to the actual management of a city. The telemedicine receiving aid from AI IoT includes the detecting of sickness onset with a device that monitors patients and creates corresponding customized treatment regimens. The same way applied to IIoT where AI is implemented for predictive maintenance, quality assurance, inventory control and in turn, the achievement of alleviated downtime and improved production. Ethical issues related to bias in algorithms, and subsequent decision making via the use of Artificial Intelligence add another layer of concern in terms of deployment and utilization. Prospects for the future include such trends as edge computing, the AIoT is AI + IoT amalgamation, and the disruptive effect of quantum computing on AI applications for the IoT. The mitigation of these difficulties and the exploitation of these opportunities will open the path to proper optimizations of AI-based IoT systems as concerns effectiveness, security and/or ethics. This article stresses how AI is mandatory to the implementation of an ideal IoT system by exploring current uses, future developments, and problems that are vital for the advancement of IoT.