Have you ever played a video game? This is unbelievably depressing. This is a future where games like Slay the Spire, with a unique art style and innovative gameplay simply are not being made.
Not to mention this childish nonsense about "forget they're playing a game," as if every game needs to be lifelike VR and there's no room for stylization or imagination. I am worried for the future that people think they want these things.
The problem is quite the opposite, that AI will be able to generate games so many game with so many play styles that it will totally dilute the value of all games.
Compare it to music gen algo's that can now produce music that is 100% indiscernible from generic crappy music. Which is insane given that 5 years ago it could maybe create the sound of something that maybe someone would describe as "sort of guitar-like". At this rate of progress it's probably not going to be long before AI is making better music than humans. And it's infinitely available too.
Its a good thing. When the printing press was invented there were probably monks and scribes who thought that this new mechanical monster that took all the individual flourish out of reading was the end of literature. Instead it became a tool to make literature better and just removed a lot of drudgery. Games with individual style and design made by people will of course still exist. They'll just be easier to make.