AI Studio falls under the Gemini API additional terms. Those terms give Google the right to keep your data on their servers for "processing" for some window (30 days, longer if free user I believe).

Of course they shouldn't use words that imply permanent deletion if it's only a front-end/workspace removal until that window expires. But if retention is expressly allowed in their terms you won't be winning anything.

You found an instance of misleading UX, which is fairly common in our industry.