Phenotypic drug discovery (PDD), which involves harnessing biological systems directly to uncover effective drugs, has undergone a resurgence in recent years. The rapid advancement of artificial intelligence (AI) over the past few years presents numerous opportunities for augmenting phenotypic drug screening on microfluidic platforms, leveraging its predictive capabilities, data analysis, efficient data processing, etc. Microfluidics coupled with AI is poised to revolutionize the landscape of phenotypic drug discovery. By integrating advanced microfluidic platforms with AI algorithms, researchers can rapidly screen large libraries of compounds, identify novel drug candidates, and elucidate complex biological pathways with unprecedented speed and efficiency. This review provides an overview of recent advances and challenges in AI-based microfluidics and their applications in drug discovery. We discuss the synergistic combination of microfluidic systems for high-throughput screening and AI-driven analysis for phenotype characterization, drug-target interactions, and predictive modeling. In addition, we highlight the potential of AI-powered microfluidics to achieve an automated drug screening system. Overall, AI-powered microfluidics represents a promising approach to shaping the future of phenotypic drug discovery by enabling rapid, cost-effective, and accurate identification of therapeutically relevant compounds.