Part of me wants to say no, that the model "thinks" in terms of text it has seen and so knows from chess forums it has seen that certain text representing moves come naturally after previous moves' text. It doesn't understand anything other than certain text comes after other text.

But yeah at the same time I can see how it is thinking inside the world we built for it. We have senses like touch, smell, sight. The only "sense" these models have are an input text box. Would we even necessarily recognize intelligence when it is so different from our own?

So does it understand chess like I do? No, it cannot. Does it understand chess at all? I'm not sure. I'm not sure I'd understand chess in it's world either though.