Integrating Artificial Intelligence (AI) with the Internet of Things (IoT) has propelled technological innovation across various industries. This systematic literature review explores the current state and future trajectories of AI in IoT, with a particular focus on emerging trends in intelligent data analysis and privacy protection. The proliferation of IoT devices, marked by voluminous data generation, has reshaped data processing methods, providing actionable insights for informed decision-making. While previous reviews have offered valuable insights, they often must comprehensively address the multifaceted dimensions of the AI-driven IoT landscape. This review aims to bridge this gap by systematically examining existing literature and acknowledging the limitations of past studies. The study uses a meticulous approach guided by established methodologies to achieve this aim. The chosen methodology ensures the rigour and validity of the review, aligning with PRISMA 2020 guidelines for systematic reviews. This systematic literature review serves as a comprehensive guide for researchers, practitioners, and policymakers, offering insights into the current landscape and paving the way for future research directions. The identified trends and challenges provide a valuable resource for navigating the evolving domain of AI in IoT, fostering a balanced, secure, and sustainable advancement in this dynamic field. Our analysis shows that integrating AI with IoT improves operational efficiency, service personalisation, and data-driven decisions in healthcare, manufacturing, and urban resource management. Real-time machine learning algorithms and edge computing solutions are set to revolutionise IoT data processing and analysis by improving system responsiveness and privacy. However, increasing concerns about data privacy and security emphasise the need for new regulatory frameworks and data protection technologies to ensure the ethical adoption of AI-driven IoT technologies.