The economics don't make sense, each video is stored ~ once (+ replication etc. but let's say O(1)) but viewed n times, so server-side upscaling on the fly is way too costly and currently not good enough client-side.
Also shorts seem to be increasing exponentially... but Youtube viewership is not. So compute wouldn't need to increase as fast as storage.
I obviously don't know the numbers. Just saying that it could be a good reason why Youtube is doing this AI upscaling. I really don't see why otherwise. There's no improvement in image quality, quite the contrary.