I think that the common meaning of AI has changed since this was written. This book was written at least 14 years ago, long before anyone had heard of an LLM. Matt Mahoney incorporated neural networks in his compressors. Afaik they weren't pretrained. They were adaptive and made one pass over the plaintext, simultaneously learning and predicting. Decoding worked similarly.
If you go and (re)read what he writes in relation to AI, which I just did, it's about exclusion. He excludes "Universal Compression" as impossible, Kolmogorov compression as uncomputable, and then he gets to Artificial Intelligence. Artificial Intelligence is an appropriate way to model data, since data is created by humans with human intelligence. And, AI doesn't violate mathematics the way Universal Compression and Kolmogorov solutions do. So therefore, Artificial Intelligence is what's left. That seems to be the argument.
If you go and (re)read what he writes in relation to AI, which I just did, it's about exclusion. He excludes "Universal Compression" as impossible, Kolmogorov compression as uncomputable, and then he gets to Artificial Intelligence. Artificial Intelligence is an appropriate way to model data, since data is created by humans with human intelligence. And, AI doesn't violate mathematics the way Universal Compression and Kolmogorov solutions do. So therefore, Artificial Intelligence is what's left. That seems to be the argument.