With the advent of the popular use of artificial intelligence (AI), the higher education (HE) sector is now facing a new challenge regarding how to exploit the educational potentials of Human-computer interaction (HCI). Developing students’ AI literacy is now attracting the attention of the HE and HCI research community. This paper aims to explore HE students’ perceptions of efficient and critical use of AI tools, and to systematically map the potential components of AI literacy as a new 21st century skill for HE students. This study applied a qualitative, exploratory approach in the form of semi-structured interviews with HE students. Results indicate that the participants primarily use ChatGPT for tasks such as brainstorming, topic selection, searching for information, and translation. While many find it useful for creating and reformatting texts, some encountered challenges, including generality in responses, outdated information, and issues during exams. Students highlighted its effectiveness in various academic tasks, from writing essays and CVs to language learning and transcription. Instructors’ perspectives on ChatGPT varied, with some advocating for its integration, while others expressed concerns about job security and misinformation. The implications of the study call for a more systematic introduction and discussion around AI literacy in educational settings.