I’d argue that the scenario where someone is paying someone to intentionally replicate others work

I’m going to stop you right there. Your argument seems to rest on the idea that knowledge and discussion of a book constitutes “replication”. I don’t concede this. I don’t think we even get to the question of “fair use” because I don’t see how knowledge and discussion can be considered copying that book.

If we were taking direct quotes from the book, we could get into copyright and fair use issues, sure. But I have never seen these AIs produce a direct quote from any source.

I don’t think what the AI is doing with its knowledge of the book is sufficiently close enough to the book to be considered a derivation or replication. Can you show me otherwise?

Lastly IMO again an algorithm can produce fantasy books at a rate which GRRM can not compete and might impact the larger market for fantasy literature.

Having the capacity to produce a derivative work is not the same thing as actually producing a derivative work. Copyright may prohibit the derivation itself, but it certainly does not prohibit the capability of creating such a derivation.