This study examines how artificial intelligence (AI) is being adopted by small and medium-sized enterprises (SMEs) in Hawaii and explores the cultural, organizational, and leadership factors that shape this adoption. Drawing on survey responses from 87 SME leaders, the research identifies clear patterns in how AI is currently used, with adoption strongest in marketing analytics and customer service automation and considerably lower in leadership-oriented applications, consistent with global SME trends. The findings show that AI integration in Hawaii is not driven solely by technological readiness but is deeply influenced by cultural values emphasizing trust, interpersonal relationships, and community reputation. Leaders consistently expressed strong support for AI as an augmentation tool, particularly for improving insight, forecasting, and decision quality, aligning with established research on AI-assisted leadership rather than AI-driven automation. Barriers including cost constraints, limited technical expertise, and data security concerns further restrict adoption, reflecting widely documented challenges in SME digital transformation. Overall, the study underscores the importance of culturally informed, human-centered AI strategies for SMEs operating in relationship-based or geographically isolated contexts. These insights contribute to a broader understanding of how AI can be integrated responsibly and effectively within culturally distinct leadership systems.