This research presents a novel AI-driven approach for architectural conceptualization that effectively merges physical and digital design domains. The effectiveness of the suggested framework was thoroughly assessed via a design competition that tasked participants with developing an innovative faculty gate design. The approach consists of a seven-stage framework: site analysis and documentation, initial documentation, conceptual development, physical model creation, model documentation, AI design generation, and AI design enhancement. This framework creates a seamless integration of practical design methodologies and sophisticated AI technologies, including stable diffusion and diverse web UIs. Participating teams exhibited the framework's versatility by utilizing several design tactics, including analogical and metaphorical design methods. The abstracted white paper models served as crucial controllers for AI-generated designs, enabling a smooth transition from physical ideation to digital reality. The final phase utilized AI methodologies like inpainting, outpainting, and upscaling to improve the generated designs. The competition results highlighted the framework's effectiveness, with participants demonstrating a range of innovative approaches and successful integration of physical modeling with AI-enhanced design visualization. This methodology combines physical modeling with AI-driven design tools, enabling architects to investigate a wider range of creative options while maintaining a link to conventional design methods. These results indicate that the seven-stage AI-integrated design framework could significantly revolutionize architectural conceptualization.