Having had experience dealing with people with conventional psychosis, I don't see it as a binary thing. Aside from a full-on psychotic break and full remission, there is a broad gray area. It can be a miasma of reality and non-reality that the sufferer may mask to varying degrees, but which influences their behavior and logic.

So, to me, AI psychosis seems apt to describe the murky areas where people are misapplying AI agents and thinking of them as social entities or suitable to drop into previously human roles, rather than carefully defining appropriate risk management strategies for this new technology.