"Generated" gets used for two very different things and the mix-up leads people to pick the wrong tool for the job. Procedural generation is rules you write once, running fast, forever, deterministically. AI generation is a model producing something new each time from a prompt, and it's neither fast, free, nor deterministic.
Procedural: rules, not guesses
A dungeon generator that places rooms by a rule set (connect these node types, respect this budget, never place a locked door before its key) will run the same seed and get the same dungeon every time. It costs nothing at runtime beyond CPU cycles, it never hallucinates a broken layout, and you can reason about its edge cases because you wrote every rule yourself. This is why Spelunky, Minecraft, and every roguelike since have used it: infinite content from a small rule set, with guarantees.
AI generation: novel, not free
A model generating a texture, a piece of dialogue, or a quest description from a prompt produces something genuinely new each call, in a way rules can't. But it costs real money and real latency per call, it can fail in ways you didn't anticipate, and it has no guarantee of internal consistency across two separate calls unless you engineer that consistency yourself.
The combination that actually works
The strongest current approach treats them as complementary, not competing. Use procedural rules for structure, layout, and anything that needs a hard guarantee (a level must be completable, an economy must balance). Use AI generation for content that benefits from novelty and doesn't need a strict guarantee (flavor text, a piece of concept art, a barks). Fliper Studio's own pipeline works this way: layout and logic follow rules, art and code get generated and then playtested against those rules before anything ships to you.
The question to ask before reaching for either
Does this piece of content need to be guaranteed correct, or does it need to be surprising? Guaranteed correct is a job for rules. Surprising is a job for a model. Most games need both, in different rooms of the same building.