I'd noticed the AI do this previously in a 1.6 game, strangely it was also the Altarians. They've been doing well this game (it's been a fun game so far actually - I had a terrible start location, they had a great one and we've both been fighting to nab the other pesky civs - and since it's a medium map they've actually been gaining territory and shaping up for a good end game).

2 issues - one is probably just a continuation of the power graph problems the game has had (it doesn't really reflect power very well - I have 5-6 of my latest fleets that can beat fairly easily most of their fleets so while they do have more ships than me - exploration treaty so i can see them all - they aren't ahead by anywhere near the crazy magnitude showing on the chart.

The more important one (though the power graph is a pain if an aggressive CIV thinks it's this far ahead as it's a guaranteed war... one it probably won't win or is 50/50 for at best and it thinks it's miles ahead and you're ripe for conquest...) is that they have moved their entire force out for this shock and awe obliteration of the Iconians. Without any transports. So it's cleared up for me. To make it worse (I guess) they've also left their planets with 1-2 ships on for the most part. So they could lose out twice - I can grab the Iconian planets nearest me (I have 2 transports ready and 1/turn coming) and another player could strike their relatively defenceless worlds as long as they have a fleet strong enough to take out their shipyard with transports.

It's good to see how far the game has come in these latest patches compared to 1.5 though and after enjoying a really good match from the AI on Incredible difficulty/medium map, I think it's mostly good news for the AI until it did this!