This is where it gets dicey with ordinary copyright too. Ideas themselves can’t be copywritten. So the idea of a werewolf teenager slaying vampires isn’t covered, but it’s how you execute it, the words you choose. Lifting their words, their expression, their execution, is infringement. Creating your own narrative with your own words is fine.
Now, if the AI is indeed lifting snippets of existing works… then it’s skirting into infringement. If it’s generating its own prose completely, then it’s creative and its own expression. How small do those snippets need to be until it’s not infringement and creative in its own right? Guess we’re debating running Shakespeare through a blender vs handing a paint brush over to Data (of Star Trek TNG).