I actually like the idea. I see it as social commentary about the soullessness of AI generated environments. Based on the trailers, that might fit in with the overall theme of the game, too.

I don't know, but to me this doesn't look soulless or sloppy at all. As they explain:

It mirrors reality, but its unique appeal comes from the setting errors and how they feel out of place, such as taxis sinking into floors, or buses sprouting from walls.

It's more about the errors that typically happen with Ai too. But it can be something your art direction wants to have, and by accident it looks like Ai generated. I don't think they want it to have look like Ai generated on purpose, but the art they are going with looks by accident like Ai.

Distortion is when something takes a shape that people have never seen before, and things unseen before are considered unique. But if the shapes are too unusual, players might think they’re related to puzzles or that the terrain has some hidden meaning. Balancing distortion to be both unique and merely background was difficult,

It's called creative direction.

Was that comment written by ChatGPT?