This is trivially refuted by the "cupcake on a plate" question posed, above: the magic ingredient is that humans infer context based on experience, while ChatGPT uses a statistical model of predictive tokenization of words to string together (highly) likely sentences given a prompt. It doesn't understand anything at all, except (dubiously) insofar as the word's meaning can be stretched to include "inference based on a statistical model".

I know what's next: "what does 'experience' even mean?" right? One could argue that ChatGPT's inference algorithm is based on "experience": but that equivocates on the meaning of the word as I expressed it.

Just because it is confused in many instances, you cannot infer that it is incapable of understanding. I would argue that if it is trained with the right data then it will “understand”