I can see AI helping writers with stuff like dialogue or being more eloquent, maybe imitating a specific style. However the issue is that AI doesn't understand what is being written. It is likely that it would write nonsensical sentences.

If AI can reach the level of general intelligence, so it understands context, than it can possibly "write" somekind of story - likely still very derivative, but coherent. The issue is it's still very far away, if it's possible at all.