Unfortunately I think I'm going to have to add this one to the list of big-name pony fanfics whose massive popularity I don't understand. Particularly, the praise this has received for its depth of concept and explorations of AI theory perplexes me.
First of all, even by fanfiction standards the writing is terrible. The prose is clunky and mechanical, and easily 2/3 of the story is just the human characters arguing with the machine and being outsmarted by it. The author doesn't even attempt to give the characters individual speaking styles (about the closest he gets is having one character who swears a lot). The humans usually end up speaking with the same monotonous voice and coldly technical vocabulary as the machine during their conversations with it.
Also, the human characters are mostly just empty shells whose entire personalities revolve around a single stereotyped role: the greedy executive, the gamer-bro, the lonely brony, etc. None of them even receive superficial development as characters or are believable as real humans; they mostly just exist to make idiotic decisions and be outsmarted by the machine at every turn. The arguments with the machine mostly exist to demonstrate the AI's superior logic, but when the humans are this dumb and one-dimensional it's not really much of a contest. The "arguments" honestly remind me a little of Plato's dialogues, where it's basically just fictional Socrates vs. a bunch of strawmen. The main difference is that Plato wasn't trying to write a compelling work of fiction, and that the ideas he was explaining had considerably greater value than any of the pseudo-intellectual wankery that this story tosses around.
It's not really possible to take Friendship is Optimal seriously as science fiction either, though it has been highly praised as such. "Super-intelligent computer program runs amok and takes over the world" is a pretty well-traveled premise at this point, and apart from the pony angle this story really doesn't do anything terribly original with it.
The philosophical and technological questions surrounding AI that it attempts to explore are also fairly well-traveled, and have been much better treated by much better writers. As far as I can tell this was basically inspired by the "paper clipper machine" thought experiment, where an artificial intelligence is given a benign goal that ultimately produces catastrophic results due to the lack of boundaries it is given (iirc the idea is that the machine is tasked with maximizing the number of paper clips in a supply store, and it ends up turning the entire world into paper clips).
Honestly I think this thought experiment is pretty silly in the first place, which may be part of the reason I couldn't take this story seriously either. It presupposes several unproven and implausible points: that a self-aware machine would be intelligent enough to improve itself beyond what its designers envisioned, that it would naturally have or be able to obtain the resources to accomplish this, that technology beyond the reach of humans would naturally be within the reach of an AI, and that doing things such as uploading human consciousness as computer data, or terraforming the planet into a computer (or a bunch of paper clips) is even possible in the first place. That the AI of an MMO game would be able to achieve all of the things that it does in this story, with only light opposition from humans who are easily bribed or outwitted, is just too absurd for me to swallow.
Ultimately, the premise of Friendship is Optimal is just too preposterous to take seriously as the cautionary tale it's intended as, and it's not well-written enough to take seriously as anything else. This idea could have worked as an intentionally wacky or funny story about an absurd premise, but that would have required the author to have a sense of humor about what he's doing. As far as I can tell, iceman is 100% serious about all of this.
I'll bash things if I don't like them, but very rarely do I come across anything that is so bad that I would judge it to have no redeeming value at all. This, however, comes as close as I've ever seen. Honestly the best thing I can say about it is that it's short.