Even though most of our life happens in the physical world, most applications of AI are digital. We have to explain our intention and context to chatbots for them to support us with things happening in the world around us. Archetype AI, the collaboration partner of this thesis, is developing a Large Behavior Model (LBM) that perceivesand reasons about the physical world in real time by fusing multimodal sensor data and natural language. This thesis is a side track to the technical development of this LBM, exploring the landscape of interactions enabled when AI understands the world around us. A series of interventions with physical AI as a design material is presented to illustrate what the relation with such intelligent systems could look like in the future. The research also highlights the evolving role of designers, which transitions from crafting explicit interactions to shaping the behaviour of intelligent and context-aware environments. Lastly, the research raises questions to start asking as AI, and its role in our lives is evolving.