I think if done well it could be a cool way of making npcs/text strings feel more "alive".
I wouldn't want full blown conversations, but the game does already include responses for some sim interactions (ie gossip), so if they incorporated AI into this they could have an infinite variety of responses rather than repeating the same few answers.
Just to experiment I asked ChatGPT to respond to a number of situations as if they were a sim with different traits and here's some responses:
Respond as if you are a character in the Sims 4 welcoming a new person to the town of Willow Creek:
"Sul sul! Welcome to the charming town of Willow Creek! You'll love the serene beauty of our neighborhoods, from the cozy suburbs to the tranquil waterfront. Make yourself at home, explore our parks and local hangouts, and get ready to create unforgettable memories in Willow Creek!"
Respond as if you are a grumpy character in the Sims 4 welcoming a new person to the town of Willow Creek:
"Oh, great. Another newcomer. Welcome to the thrilling town of Willow Creek, I guess. Don't expect much excitement around here; it's mostly just the same old routine. But hey, if you're into monotony and predictable neighbors, you'll fit right in. Enjoy your stay... or whatever."
Respond as if you are a rich and snobby character in the Sims 4 welcoming a new person to the town of Willow Creek:
"Ah, another ordinary soul infiltrating the mediocrity of Willow Creek. Take heed, newcomer, for you have entered a realm far below my elevated social standing. Consider yourself fortunate to witness a glimpse of my opulence, but remember, darling, you'll forever remain a mere observer in this world of refined distinction."
Respond as if you are a childish character in the Sims 4 welcoming a new person to the town of Willow Creek:
"Yay, new friend alert! Welcome to Willow Creek, the coolest town ever! We have awesome parks to play in, swings to swing on, and puddles to jump in! Let's have endless fun together and create epic adventures in this super-duper town. Yippee!"
Respond as if you are a character in the Sims 4 gossiping about another person in the town of Willow Creek:
"Guess what? Word on the street is that has been seen sneaking around town in a disguise, pretending to be a famous celebrity – quite the drama queen, if you ask me!"
"Psst, did you hear? Rumor has it that has been collecting an absurd amount of garden gnomes, turning their lawn into a whimsical gnome paradise!"
"You won't believe it, but was spotted talking to their plants as if they were having a full-blown conversation – a true green-thumb eccentric!"
"Psst, you won't believe it! I overheard that has been secretly perfecting their culinary skills and serving up gourmet meals to unsuspecting neighbors – seems like a deliciously delightful secret to keep!"
"Psst, have you heard? It seems has been caught redecorating their entire house in shades of neon pink and lime green – talk about an eye-catching fashion disaster!"
I think if done well this could really help make traits feel more impactful and give townies more individuality. You could do the same with any trait, so then every sim will respond differently to a prompt depending on their personality.