This narrative literature review undertakes a comprehensive examination of the burgeoning field, tracing the development of artificial intelligence (AI)-powered tools for depression and anxiety detection from the level of intricate algorithms to practical applications. Delivering essential mental health care services is now a significant public health priority. In recent years, AI has become a game-changer in the early identification and intervention of these pervasive mental health disorders. AI tools can potentially empower behavioral healthcare services by helping psychiatrists collect objective data on patients\' progress and tasks. This study emphasizes the current understanding of AI, the different types of AI, its current use in multiple mental health disorders, advantages, disadvantages, and future potentials. As technology develops and the digitalization of the modern era increases, there will be a rise in the application of artificial intelligence in psychiatry; therefore, a comprehensive understanding will be needed. We searched PubMed, Google Scholar, and Science Direct using keywords for this. In a recent review of studies using electronic health records (EHR) with AI and machine learning techniques for diagnosing all clinical conditions, roughly 99 publications have been found. Out of these, 35 studies were identified for mental health disorders in all age groups, and among them, six studies utilized EHR data sources. By critically analyzing prominent scholarly works, we aim to illuminate the current state of this technology, exploring its successes, limitations, and future directions. In doing so, we hope to contribute to a nuanced understanding of AI\'s potential to revolutionize mental health diagnostics and pave the way for further research and development in this critically important domain.