No, they are building them. Your just not noticing probably, or have a few visual effects disabled. Also the possibility that your hitting parts where they are not building.

As of now the I seems to spend most of its money on caps and titans, yes. No idea why, though. The AI also seems to rush for superweapons, when testing the Advent just now I had a superweapon warning half an hour into the game again, with the pirate base dieing to spam minutes later...

The AI does build frigates and the like, but once it reached a certain research level it seems to prefer filling up its supply with capships. This can be quite challenging when you attack them, but on the defense... let's just say capships alone don't have what it takes to breach my defenses.

This might be a messed up line of code in AI scripting, and hopefully gets fixed at some point. It's a shame the AI doesn't use more than half of its available fleet supply.

The AI seems to be doing substantially better from previous releases in terms of fleet support for caps and titans.  I've been playing on Large, Multi Star with all AIs set to Random personality and Hard.  Usually the first AI I hit falls pretty hard but the next two show up with reasonable to challenging fleet sizes, Kodiaks , Caps, Javelins, Carriers and often a Titan.  I'm not a great player but it seems to be capable of giving me a run for my money now.

I never rly had this problem with the AI it has always attack me with large numbers Kodiaks carriers and cap and now and again their own titan. and using just caps with the titan is not a bad strategy i do it all the time plus i back them up with carriers

Having only caps is a terrible strategy. Until they get a Titan with them (which takes the AI ages), you can literally roll them with any fleet you want for the first 10 hours of the game. 

TEC Rebels?

Pirate Mercenaries, the pirates constantly send them ships.