In the era of burgeoning artificial intelligence, declining fertility rates in China are engendering novel transformations within the education sector. Through the lens of Robert K. Merton’s functional analysis, it becomes evident that these demographic shifts exert dualistic effects on education, encompassing both positive and negative dimensions, while manifesting through distinct explicit and latent pathways. Positively, at the macro-level, manifest effects optimize educational resource allocation while latent effects drive systemic reforms. At the meso-level, teaching manifests AI-enhanced instructional improvements with latent shifts in collaborative learning; research manifests heightened focus on cutting-edge domains with latent expansion of scholarly directions. At the micro-level, manifest effects adjust household educational investments with latent transformations in parental education philosophies. Negatively, macro-level impacts include resource underutilization (manifest) and reform inertia (latent). Meso-level teaching consequences involve constrained teacher development (manifest) and diminished student social skills (latent); research shows skewed resource distribution (manifest) and reduced innovation (latent). Micro-level impacts exacerbate educational involution (manifest) and misaligned developmental priorities (latent). Corresponding AI-informed strategies are proposed: macro-level resource rationalization and fiscal restructuring; meso-level enhanced teacher development, reduced student academic burdens, and dynamic research resource allocation; and micro-level innovative parenting approaches, diversified resource access, and prudent educational risk management. Future research should investigate synergistic mechanisms between demographic shifts and AI to advance China’s national education powerhouse initiative through precise theoretical and practical guidance.