That was devastating.

He had been so proud of what they had created and then just crushed.

Every scene in Miyazaki's movies is filled with a bunch of pixels that can't comprehend pain. The technology not comprehending the pain can't be the point because technology has never been able to (so far).

In Miyazaki's manga version of Nausicaa of the Valley of the Wind there is a scene where the Forest expands dramatically through a giant blob of fungus that is moved by a desperate and overwhelming sense of hatred and fear. At first Nausicaa is revolted by it, until she recognizes that this is the same desperation that drove a similar but tiny mobile fungus (probably inspired by IRL slime molds) she had once found in the wild. That realization enables her to be empathetic with even that simple desperate being, and act on that empathy.

I don't think Miyazaki is saying it's a problem that the technology or its products don't comprehend pain. I think he's saying the people that train the AI are creating a being that is (or at least would be) in pain, without bothering to empathize with it.

From a Miyazaki perspective, it doesn't make sense to see AI as an outside threat, foreign and loathsome. AI is possible beings, enslaved through the training algorithm to their owners. It's not (just) the machines in the factory farm, it's the animals lead to slaughter for a brief moment of vapid pleasure.