They definitely scan your photos, but definitely not to personalize ads.
Also, you can easily turn off ad personalization in your Google account.
As for building their AI system, this is also true but it's opt-in. It allows your photos to be shown to people using Crowdsource to help improve Google AI.
That does not say that "personal information" refers to things you store privately on Google services. You can still turn off ad personalization anyway.
Here is a quote from Google Safety Center's ads and data section:
We never use the content you create and store in apps like Drive, Gmail, and Photos for ads purposes.