The integration of Artificial Intelligence (AI) into digital marketing has revolutionized personalization strategies, offering tailored experiences that increase user engagement and conversion rates. However, growing concerns around data privacy, algorithmic transparency, and perceived manipulation challenge consumer trust in AI-driven personalization. This study investigates how AI-powered personalization impacts consumer trust in the context of e-commerce. Using empirical data collected from online shoppers through structured surveys and behavioral analysis, the study examines the dual effects of personalization: enhancing perceived relevance and creating trust tensions due to privacy invasions. Results indicate that while AI-enhanced personalization significantly improves user satisfaction and engagement, consumer trust is conditional upon transparency, control, and ethical data usage. These findings highlight the need for marketers to adopt a balance between hyper-personalization and privacy assurances to maintain sustainable consumer relationships. The study offers practical recommendations for ethical AI deployment in digital marketing strategies