By investing in more research and more teams working on AI per title. Maybe it isn't for this thread as it's not about the new hardware and it's capabilities as you have pointed out, but it's clear that AI is what lets down even the best of games.
Take GT5 for example. Beautiful game, great physics, very slick UI and all round great production.
But it's a racing game and the AI sucked. If you have a car to match the best car in the field, then if you are a half decent driver you should win every time because outside of following the racing lines, the AI had no tactics to fall back on. What sort of racing "Simulation" is that? You don't feel like you are racing against anyone, you just feel like you are trying to go faster than cars doing laps around a track.