In game NPC actions have been called "AI" for decades. Computers playing chess has been called AI for decades. Lots of stuff has been.
Nobody thought they were genuinely sentient or sapient.
The fact that people lumped LLMs, text-to-image generators, machine learning algorithms, image recognition algorithms, etc into a category and called it "AI" doesn't mean they think it is self aware or intelligent in the way a human would be.
No it isn't.