[imtringued]

It's called AI because it drives the behavior of the NPCs, hence the name "artificial intelligence". I couldn't think of a better fitting term, especially if you know it is in the context of games. Everyone who actually plays games knows what AI in gaming means and that it doesn't need to involve LLMs or neural networks.

The thing about artificial intelligence is that it doesn't necessarily have to look or behave like biological intelligence. It could very well be a very alien and foreign form of intelligence.