As an artist by trade, and kind of an enthusiast for AI generation, I think the panic is overblown. Yes, it makes very pretty images if you stay with it and coax it into making something coherent over dozens if not hundreds of human-curated refinements. Yes, sometimes it's freaky how well it "understands" your query every once in a while. I think people look at the best of the best of the best (to the human eye) of what you can eventually get with AI generation and assume that the AI even knows how it got there, or knows what you like about it. Since a lot of people are just looking at the results and aren't making them themselves, they don't see the hundreds of thousands of results that are absolute junk, the minuscule amount that come back even workable, and how even when you get something you like, because it doesn't know why you like it, refining it never gets easier. You are always at square one, rolling dice, and the more I use it, the less afraid of it I am.
That's all before talking about how this wild west phase is going to be short lived. As soon as AI starts approaching genuine broad appeal for use in an art pipeline, there's going to be a reckoning regarding how these AIs are trained. AI can't generate images mimicking art without being trained on a vast library of preexisting art to chop and screw. Most quality art and named styles are under copyright, creative commons or something like it. Right now, it's pretty clear that a lot of these generators, especially the free and public ones, are just crawling Google Images with your query terms, slapping things together with enough smudging and obfuscation that it can't be called plagiarism, then giving the rights to that image either to the AI company or the query-maker. That's not going to sit well with most copyright holders. Nintendo's going to see people using AI to get images of mpreg Mario and they're gonna say A: your for-profit AI service has to be stealing copyrighted material for it to know what Mario is and what he looks like, and B: that image of pregnant Mario belongs to Nintendo. Cease and desist.
The closer an AI gets to knowing what copyrighted art looks like, and the better it gets at replicating it, the more concerned that copyright holder is gonna be. It might eventually be decided that AIs can legally be trained however the engineers want, and everything it pumps out is legal and fair use, there's still going to be a long process where those kinds of legal disputes gets hashed out. We're a ways off.
But like, tricking people on the internet? You can do that now. I dunno how much that'll be good for, or for how long.