Ars has often gone with “confabulation”:

>Confabulation was coined right here on Ars, by AI-beat columnist Benj Edwards, in Why ChatGPT and Bing Chat are so good at making things up (Apr 2023).

https://arstechnica.com/civis/threads/researchers-describe-h...

>Generative AI is so new that we need metaphors borrowed from existing ideas to explain these highly technical concepts to the broader public. In this vein, we feel the term "confabulation," although similarly imperfect, is a better metaphor than "hallucination." In human psychology, a "confabulation" occurs when someone's memory has a gap and the brain convincingly fills in the rest without intending to deceive others.

https://arstechnica.com/information-technology/2023/04/why-a...