You are confused by the layman term "AI". The actual experts dont use it. Your confusion stems from the problem that you see the term "AI" used for wildly different things, and think they are the same.
They call REAL AI "machine learnig", or more specifically "neural nets". It is a technology developed in the 1950s that is supposed to emulate how biological brains work. Neural networks are not programmed, they are trained. They cannot be read, understood, or bugfixed. They are inherently wasteful and error phrone. Many modern chips have now specialized circuitry just for neural nets.
NPCs are no controlled by such real AI. They are controlled by scripting. Which is also called "AI" in gaming since decades, but it never was machine learning.
Scripting is basically the same as regular programming, but typically it is not compiled and runs much slower than compiled programs. This makes scripting much easier to use for a level designer. The lack of performance doesnt matter, because scripts dont do any computaionally expensive tasks.
Importantly scripts can be read, understood, and bugfixed. They are mostly like regular programms, however since they are not going to be compiled, they may be more comfortable to use.
So Larian basically promised us that their artwork will always be human made. They will use AI only to help their artists to do their job better, but the actual artwork in the game will be of highest quality.
However their monsters, companions etc will still be controlled by scripting, as always.