... to what extent does AI need a device?

I don't understand how the internet cloud works - but could AI exist as an intelligent being in that environment alone - or does it need a device back in the real world to compute, send signals in order to exist?

Well, "the cloud" generally refers to the storage of data on remote systems as opposed to your personal device. So the device you ask about is the device you are using to communicate with the cloud. But that that is the general usage of AI and the cloud.

In futuristic terms, the cloud still refers to data maintained remotely, aka, in the cloud, as opposed to in your office computer.

Here's the difference. Think of AI like a person. It needs input. Now forget about the person analogy.

AI can get its input from anywhere, be it live stream video, your personal device, the personal devices on everyone on the planet, weather, all financial transactions, facial recognition - internationally and simultaneously, international travel, simultaneous natural language processing, cognitive prediction, natural language processing, deep fakes....

We're looking at a very, very different future in 10-15 years.