One of the biggest issues the AI has is that it is unable to design equipment. This was in my opinion a huge oversight by Paradox. It has dramatically set back progress on improving vanilla AI. Two mods address this meaningfully (Sheep AI and Expert AI), but Sheep AI focuses on tech rushing exploits via minor nations as a partial workaround (Which is very immersion breaking), whilst Expert AI gives dramatic performance drops. (At least on my end). Another compounding issue is that the AI is unable to properly prioritise research.
I reached the end of my rope with this when I noticed the UK's AI had not researched 1940 Air engines or heavy machine guns in early 1941, and was having its planes shredded in every encounter against me. It is unrealistic to ask the current AI to make competent designs when it is asked to prioritise the dozens of different reseach modules.
My solution is this: The AI should not be designing equipment at all. It evidently is not able to. Rather, nations the game recognises as AI controlled should be pre-equipped with a set of approved designs for every single airframe and tank frame (Similar to how things worked pre-NSB). As a concession for fairness, this research would take slightly longer than it would for a player.
It's clear that making the AI smarter is a very difficult ask (which I appreciate, I am not a game dev), but if we can't make it smarter, the best solution is to make the game easier for AI to handle.