AI generated games are starting to appear
(web.archive.org)
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I'm not so down on a game using AI-generated assets, but the way they've used it sounds bad. I'd either use it as an invisible step in the pipeline - like the algorithms used to generate 3D meshes from 2D images - or lean into the idea by using AI-generated remixes to populate a dreamscape.
AI art/music is an excellent way to create a baseline, something you use as a placeholder that gives you a very "realistic" idea of what the end product will be like, while you're going through creating the product, since those elements are usually left for last. Then you're not encountering Missingnos when you're compile-testing play environments.