Generative AI is already being tapped to write books, but it struggles with basic narrative. Just look at what happens when you make one a dungeon master.
What ChatGPT tend to do is just repeating your prompt back to you.
It's more often than not if you want to use it for any kind of story-telling you have to handhold it with the direction you want it to go instead of just letting it do whatever, since it really likes to railroad the story to the most generic direction possible.
You really have to inject that spark of madness into the prompt yourself to make it work.
The story seems to be behind a paywall, but I guess I don't need a news article to tell me that what they have decided is AI is merely more and more code querying more and more data, and no real thinking whatsoever as a computer is not capable of making an actual decision other than what it is programmed to do. So spitting out crap isn't shocking to me in any way.
I just used Google's Bard AI today to create a character introduction summary for one of my players and it worked very well, took some coaxing and editing but we were very happy with the outcome.