I feel that it was a canard Watts used to explain apocalyptic malevolence, rather than an actual exploration of the concept. It was also a sideshow compared to the anti-orthogonal vampires, the anti-VR trope and whatever bizarre made-up mental disability the protagonist had. Watts shuffled about five half-baked ideas into a narrative so that he didn't have to fully-bake any single one of them. It's an amateur move.
Particularly as the whole "intelligence-without self-awareness" idea was spiked in the endzone by Solaris in '61 and through the goalposts in 2005 by Spin.