I don't think that saying that AI in Dom3 bad is correct. It actually plays relatively reasonable (though straightforward strategy). Its main weakness is that it always plays the same strategy, and it differs very little between different AI nations. So after you learn how to counter that strategy, AI will be easy to beat. Somewhat experienced players normally set AI on impossible - this give some design point bonuses to AI, which isn't that much by itself, but it causes cascade effect because you can't keep armies as large as AI, so somebody declares war on you. Even though you're winning that war you suffer attritition which makes you look weaker to other AI and they promptly declare war on you too. Thus you often end up fighting 4-5 AI nations at the same time which increases the challenge
I've also noticed that in poor games with fast research AI tends to be more interesting. It correctly evaluates importance of magic and starts to use mages actively and because mages are different depending on nation, playing against different nations actually leads to somewhat different games. I don't think that AI "thinks" at strategic level in those cases, but sometimes it comes up with cunning battlefield tactics
Overall, I'm impressed by improvement in spellcasting AI. After I've started to play poor games with fast research it became quite apparent.