The AI was actually developed based on feedback from professional Japanese players, so the higher levels are in no way newbie friendly unlike Melee/Brawl CPUs back in the day.
And as mentioned before, yes they do read your inputs, and yes, there is a counteraction to everything they do. Problem is that they always respond the same way to the same situation, so a major aspect of playing the game (ie. reading your opponent) is lost if all you do is strive to improve yourself by fighting lv9 CPUs.
Essentially, if you get good at fighting lv9s, you also develop some really bad habits, such as spamming smash attacks or projectiles under nonideal circumstances.
And hey, if you're a slow learner and don't feel like being the new Mang0, it shouldn't matter too much as long as you find people you can play with and have some fun. But if you really want to learn, then yes, fight people online or locally. And if you must practice against CPUs, you're better off fighting lv1s, because then you can at least practice combos and kill confirms.