An artificial intelligence (AI) system for generating a digital surface model (DSM) may include a memory and a processor cooperating therewith to determine an estimated height map from electro-optic (EO) imagery of a geographic area using artificial intelligence. The processor may further generate cost coefficients for a three-dimensional (3D) cost cube based upon stereo-geographic image data and height value seeding using the estimated height map, and generate a DSM for the geographic area based upon the 3D cost cube and outputting the DSM to a display.