If that is faithful reading of the law, that makes sense. I know a number of people who use AI, but none of them (that are making anything actually useful) have the output "entirely generated" (aside from some POC tests that never see the light of day).
I have a hard time believing anything of value, anything worth copyrighting, could be entirely generated by AI.
However, I just saw a product yesterday that was released and being built as you described. Interesting times.
Perhaps you're not stretching your imagination enough. What if an expert novelist used an AI like it were a fancy auto-completing dictation machine to write the next great American novel? AI may have "entirely generated" all the text, but what if they micromanaged the shit out it?
I can imagine the difference between someone who fires off a lazy 5 minute prompt, and someone who labors for months and months to get exactly the results they want.