The AI in Total War games is not bad at all compared to most other strategy games. In many other popular RTS (e.g. Warcraft, Starcraft, C&C) the challenge from the AI mostly derives from large numbers ('quantity'). Large number of defensive towers, enemy units, etc. Also, on 'Hard' difficulty modes, the AI is allowed to "cheat" like building units faster, costing less resources etc. The whole Sun Tzu AI concept is mostly a very nice sounding marketing term, but it is also true that Total War AI also employs 'quality' by using terrain effectively and making smart moves on the campaign map. That's a great thing and let's hope CA can keep it up.

Diplomacy is still way behind games like Civilization, though. That's one area where the AI can improve, as ten years after the first game, most alliances in Total War are still pointless.

P.S.
Finally found my old account, meh.