Phrases like "actual understanding", "true intelligence" etc. are not conducive to productive discussion unless you take the trouble to define what you mean by them (which ~nobody ever does). They're highly ambiguous and it's never clear what specific claims they do or don't imply when used by any given person.

But I think this specific claim is clearly wrong, if taken at face value:

> They just regurgitate text compressed in their memory

They're clearly capable of producing novel utterances, so they can't just be doing that. (Unless we're dealing with a very loose definition of "regurgitate", in which case it's probably best to use a different word if we want to understand each other.)