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Right. A game has to be fun above all. Players want enough AI to keep things immersive but not so smart that it breaks the flow by being too hard to pass.

But people still enjoy playing multiplayer for the added challenge.

Bad AIs can really break immersion, for example in one of the Settlers of Catan games they'll refuse to trade with non-AI players. In civ5 harder AIs just get random levels of free stuff but otherwise are still rather dumb.

In FPS, most of the people playing are also bad, but their behaviors can be coherent. The enjoyable part is the random nature of your opponents and the context of the conflicts.

I suspect there's a sort of uncanny valley, where beyond a certain point bots become too complex to predict but too stupid to be interesting.

With deep learning maybe we have a hope to reach the other side where AI can add value.

AI could use a lot of immersive improvements, there is a lot of low hanging fruit above "hard mode enemies have 4x HP" or "the easy AI is an aimbot with a slightly longer reaction delay".