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They do, to a degree. See e.g. PUBG's latest AI teammate addition.

AI players in games go back all the way to the dawn of computers. But I still prefer them in Quake and Starcraft to humans. Humans are awful.

Yes, naturally. However the PUBG AI feature is based on generative AI, at least partly: https://www.nvidia.com/en-us/geforce/news/pubg-ally-ai-teamm...

Watch the videos of alphastar as it challenged the top starcraft 2 players to win. This was back in 2019 and was amazing to watch.

That's called a single player game, or playing against bots.