To keep it brief, I suspect any sort of legal challenge to the whole "AI image generation" concept is gonna be won by the "Hey, this thing is largely based on violating copyrights" side, not the side that is probably making a "fair use" argument. Of course, judges can't just slam an undo button and wipe out the ability of people to just run this stuff on their own.
Fake nudes of celebrities has existed for a long time, the difference is that you don't have to be good at photoshop to make fakes anymore.