I am using box collision for objects and NPCs but it detects also through walls. So I want to use line tracing or sphere tracing but I am afraid of the performance issues if also my NPCs are using this to detect something.
Is there a better way or are my fears unfounded?
Just test it yourself. Make blueprint that traces around self with lines or spheres, make it read some boolean in player controller. Then create 1000 of those in box. Change to sphere and line and see difference.
I think trace line or trace sphere will not have big impact. worst for crowd AI are collision and pathfinding. Then skeletal meshes rendering and animations. Line tracing is somewhere down the list.
Also if you want to make lots of ai bots you should look into behavior trees and EQS.