AI is definitely never the optimal way to train. There are things that AI cannot emulate from human players: particular habits, adaptation, stress/fatigue/emotion, etc. A lot of strategy and things you play off on during a match aren't going to be found against an AI-opponent. It's a pretty big detriment to learning when you can't establish good fundamentals like spacing, conditioning, and mindgames/mixups.
I would dare to say that even training mode would be better than arcade mode. At least there you can test properties without a moving opponent or experiment. Some games will even allow you to record inputs for the dummy so you can test blockstrings or how to punish particular moves or setups. AI is decent for learning how to hitconfirm or just to reinforce your muscle memory with combos (which is better suited for training mode anyway).
One thing to be careful of when playing against the AI is picking up bad habits. As non-adaptive AI, once you figure out a way to overcome them, you may lead yourself into believing that a particular tactic is viable or really works, when, in reality, an adaptive human opponent can easily counteract a particular technique or setup after seeing it a few times or even once. Do note that this doesn't just go for KOF, but any fighting game. Your best bet is always to find a human opponent of equal or greater skill. The AI can't give you feedback on things you need to work on or improve, but a friend or opponent definitely can.
