Correct. Co-pilot is simply operating under the current interpretation of copyright law, which has provisions for fair use which is actually very important for how software development works. Fair use is crucial. Without that we can't implement proprietary APIs or allow ourselves to be inspired by other people's work. The samples of code you get from co-pilot aren't any different from those you find in a book (copyrighted and typically not OSS), on stackoverflow, or code you have seen somewhere else (for example on Github). And programmers use all of the above. If you don't like that, keep your code proprietary and refrain from publishing it.

In the same way, Google is making use of fair use by providing website titles, summaries, book samples, etc. There has been some controversy with news about them taking that too far. But by and large, they are still legal. And people of course have tried to challenge that in courts. It's just small samples being distributed, not a complete work. There are lots of examples of companies depending on fair use for all sorts of things. E.g. quoting an author or paraphrasing their work is fine. You don't need their permission for that.

Also another point here is that it isn't necessarily just MS that would be violating copyright (if the above somehow wasn't the case) but the receiver of the auto-completed code that ends up distributing that code. Because it is that code that ends up being distributed. All MS does is show you some code sample, it's the programmer that decides what to do with it. Whether you receive your sample from Stackoverflow, co-pilot, or a book is not relevant: you are responsible for the code you distribute.

Finally, the Github terms of use give Github some rights to doing things to your code if you choose to put it on Github. That probably also covers what they are doing with Github Co-pilot. That's a valid reason for removing your code from Github if you don't agree with that but of course no guarantee that Github Co-pilot would not crawl external public git repositories or that whomever you pick as an alternative wouldn't have some similar legalese in their terms of use. If these things matter to you, review it. Just because Gitlab hasn't launched a co-pilot competitor doesn't mean they couldn't.