This is correct, and it's not limited to code. I can take the story of Cinderella, create something new out of it, copyright my new work, but Cinderella remains public domain for someone else to do something with.

If I use public domain code in a project under a license, the whole work remains under the license, but not the public domain code.

I'm not sure what the hullabaloo is about.

If someone else uses your exact same prompt to generate the exact same code, can you claim copyright infringement against them? If the output is possible to copyright, then you could claim their prompt is infringement (just like if it reproduced Harry Potter). If it isn’t copyrightable, then the kernel would not have legal standing to enforce the GPL on those lines of code against any future AI reproduction of them. The developers might need to show that the code is licensed under GPL and only GPL, otherwise there is the possibility the same original contributor (eg the AI) did permit the copy. The GPL is an imposed restriction on what the kernel can legally do with any code contributions. That seems legally complicated for some projects—probably not the kernel with the large amount of pre-AI code, but maybe it spells trouble for smaller newer projects if they want to sue over infringement. IANAL.