The AI isn't really capable of handling competent players (period) because it is AI.  It's just limited by virtue of what it is even though it might be pretty good as far as AI goes.  It cannot micromanage its ships well.  (Notice how some of its ships will charge forward, alone, towards your fleet and certain death without even scratching your fleet instead of staying bunched up together or just simply retreating?)  It cannot prioritize which enemy ships and structures to destroy first.  It cannot time when to use capital ship abilities properly, assuming that it even builds the most strategic capital ships and upgraded them properly.  It cannot really weigh the value of choosing to build a certain structure at a certain location nor the value of certain types of research.  It cannot develop a game plan.  It cannot use creative strategies and tactics.  This isn't a knock on the Sins AI which is pretty good as far as AI goes.  Rather, it's a knock on AI in general.

I think the conventional wisdom is that you'll find the AI to be toughest in Regular Sins because that way it doesn't have to deal with the added complexities of starbases; it won't waste its own money and resources on them and won't suicide itself on upgraded enemy starbases.

If you end up feeling unsatisfied with the challenge the AI offers and desire competent opponents, and if you are brave, you can try the game in online multiplayer by clicking the <Ironclad Online> button.  Note that you can play against AI online while having human teammates in games called Comp Stomps, which are pretty popular.  It isn't at all uncommon to see 2-4 friends setting up games against 6-8 AI.  (It's a chance to make friends with people and learn from what they do since you'll be able to watch their every move.)  Online multiplayer also offers real locked team v. team games with up to 10 people, which is a very different experience from playing one man against 9 warring AIs in free-for-all-style.  It's so good, in fact, that once you are competent and can hold your own against human competition, you won't want to play the game against the AI.  The games are much more suspenseful, fulfilling, and intense, and you'll also find that the strategy is much more involved and deeper.

The game I played last night against a Vicious AI in Diplomacy actually did get Auxiliary Government. It also used a different Starbase to counter my culture which was annoying as I was trying to colonize a planet next to it and it would not allow me to because of that Starbase in the adjacent grav well (I had several caps parked there for a quite a long time).

I built a starbase in a plasma storm (whatever storm prevents strike craft launches) to control a choke.

The Hard AI assaulted me with 3 carrier cruisers, light  frigs, flak, and two capital ships.

1) Shouldn't the AI have understood that "no strike craft" really meant "no strike craft" and left the carriers at home?

2) The AI suicided the entire fleet, including both capitals (levels 5 and 3) and the starbase survived with 4k hitpoints.  The AI seems to understand retreating in fleet vs  fleet fights, but not vs. starbases?

3) The AI knew that the ice planet next to the storm was a new colony with no defenses, and my fleet was busy dealing with pirates.  The AI needs to learn to bypass choke points and hit soft targets at the rear, ESPECIALLY when the AI scouted me out, otherwise whats the point in the AI scouting me?

I realize that the AI isn't capable of planning ahead or remembering past events, but how hard would it be to prioritize a defenseless target with intel less than one minute old over a starbase w/o a planet that you could just fly past with acceptable losses?

I hope the developers are paying attention and will incorporate these experiences in the next patch/update.

@DirtySanchez: I've limited time to play the game and have only recently started with the original against the AI. I can now beat them at normal, and want to beat them at hard first before I try to play against you pro's. Are there also games in which only relatively new players play? In addition, I think it would be good to also learn to play as Advent and Vasari before I test my skills online.

human competition on sins isnt competition they paly it like C&C. spam one type of unit with 2 or so caps not even a fleet if i say so. learn how to play sins then u can call it compitition. i like the real experiance 20 up of each ship with  6 or so caps in each fleet going at it it not hard to control a sins fleet now . lol and diplomacys AI eats starbases for lunch and they also build the  most powerful cruiser early game and come with a fully reasaerched fleet i like the new difficulty it actoully can kill me