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Yes it's using "an AI". But that doesn't mean anything. You can't just use any AI and have the same result. Just cause AI got a global hype doesn't mean this is new either. Neural networks have existed for many decades, which is likely what they're using. The hard part is to get the training data. That is where the value (or usefulnes) comes from. And that source is all their users, listening to all the music, importantly including newly released music, all the time. It's the basic idea of "people who liked X also liked Y". What songs people combine together in a playlist. That sort of thing.
We don't have that data to train "an AI" so we have a local version of this. They have it for millions of users. That's why their AI is incredibly good at this task. Sure, they also let labels pay them to rank things higher so they get more listens, and that is anything but transparent when and how that happens. But over all, you can't just magically do what they are doing locally.