I remember there was a rumor going around Twitter when Palworld first launched that Pocketpair had used AI for some of their character designs, and there was some backlash, but it turned out to be false. Feeling some of that heat, even if it was unwarranted, probably also helped set their opinions on using AI for that kind of stuff.
If gamers don't want it and your own staff doesn't want to use it, no point in wasting money trying to force it.