Particularly for finer gauge knits, I believe warp knitting is often used, where many strands are knit at once, crossing back and forth instead of a single strand going round and round (weft knitting) so there shouldn't be any issues with stretching or rotating. There's no reason a T-shirt can't be automated like anything else as far as I know, but I'm not in the industry at all.

I view it much like 3D printing, it's a tool that is well suited for some materials and tasks, but quite poor for others. Working around its constraints is part of the fun!