I just asked (another anthropomorphic verb) ChatGPT for a better word and it came up with "fabricate".
> The term "fabricate" could be used to describe AI's tendency to generate fictitious information. This term has less anthropomorphic connotations than "hallucinate" and directly refers to the creation or construction of something, which could be a suitable representation for what an AI system does when it generates false data. Other alternatives could be "synthesize" or "generate," depending on the specific context.