Maybe if marketing people stopped using the incredibly generic term "AI", and started actually saying what something is, it might work better. When you say "this app is powered by AI", do you mean Skynet, an LLM, or a basic machine learning system?
People are not confused about these.
Or sometimes basic image recognition.
I've worked at a company whose product involved some decently advanced computer vision, marketed as AI (which isn't incorrect).
I've also seen companies that were doing machine learning before the LLM boom, who remarketed their machine-learning-based product as AI (which isn't incorrect).
I mean I agree with you just that the popular perception of that word has changed