They've overhyped the hell out of it and slapped those letters on everything including a lot of half baked ideas. Of course people are tired of it and beginning to associate ai with bad marketing.
This whole situation really does feel dotcommish. I suspect we will soon see an ai crash, then a decade or so later it will be ubiquitous but far less hyped.
Thing is, it already was ubiquitous before the AI "boom". That's why everything got an AI label added so quickly, because everything was already using machine learning! LLMs are new, but they're just one form of AI and tbh they don't do 90% of the stuff they're marketed as and most things would be better off without them.
What did they even expect, calling something "AI" when it's no more "AI" than a Perl script determining whether a picture contains more red color than green or vice versa.
Anything making some kind of determination via technical means, including MCs and control systems, has been called AI.
When people start using the abbreviation as if it were "the" AI, naturally first there'll be a hype of clueless people, and then everybody will understand that this is no different from what was before. Just lots of data and computing power to make a show.