[Ygorl]

You're right about why he didn't cast Fanaticism. In a case like that, the AI picks a spell out of everything he might cast. The AI tends to favor spells that protect the caster, followed by spells that summon dudes, unless there's a nice target available for a direct-damage spell.

It might be true that Niefel Giants have "chill" (which causes fatigue and sometimes chilling of neighbors) but not "Breath of Winter" (which also causes actual damage). I suspect this is the case, actually? Anyway, the AI likes the spell, and isn't aware that it can sometimes hurt your own guys. It's maybe the biggest spellcasting AI frustration in the game.

The way the AI works, by the way, (if I'm remembering right) is that it first looks at the scripted spell - if it would have no effect, or if the script is such that the caster's spell is not specified, it practice-casts a bunch of spells (several times each?) and picks the one that has the best effect to actually cast. Not sure how "best" is defined.