I've seen "bullshitting" suggested, but this of course still implies intent, which AIs do not have in any typical sense of the word.

I think we as a community have settled on hallucination as the best English word that approximately conveys the idea. I've seen folks on here making up words to describe it, as if that is any more useful to the victim here. The victim being the uninformed (w.r.t AI tech) layperson.