I wonder if an AI can make a better codec, and if we would think of it as "magic".

Transmission cost of an interpolated frame: 0 with DLSS. But adding a little extra information could help reduce artifacts.

Sure, DLSS uses game engine information, such as motion vectors and depth, which is unavailable for video. But neural networks can estimate motion directly from video frames and interpolate without that information. Providing additional data to fix artifacts would cost little.

There are some interesting advances in neural video encoders and decoders - I suspect it will look a lot like the neural models in DLSS 5 for compression -> decompression/reconstitution. There have been some lossless text-compression neural models built that seem to surpass even high level compression algorithms so with time those could get there.

The fact that you said 5 worries me.