Yes, and it can't not happen.

We know two things about writing:

1. Almost all (and some would argue a strong "all") fictional writing is rehashing ideas we've already had in genres already defined. Some of our stock characters go back to the ancient Sumerians. We change some names and some locations, maybe the precise details, but all a modern author does is put flesh on existing bones to create a new story. A good story is primarily how well an author can do this derivation.
2. We have AI models which can rate stories. For movies, they're almost as good as human critics (and agree with them), while for the written word they're not as good as human critics - but still closely agree with them.

Given the two precepts above, we aren't that far from an AI model able to generate long-form stories. AIs work, like humans do, on their knowledge, which is primarily what it was taught is the state of the art. At the moment, a home-PC ready AI (e.g. Stable Diffusion) is able to store approximately the same volume of knowledge about a given field that a human can.

With a ratings capability, this closes the loop, and the AI knows how to get better.

AIs are also capable of innovation humans are not as they can spot derivations and inferences at a much greater distance and use a larger data set at any one time: Your working memory is limited, an AI's isn't. If you try to think of an AI model as "just a dumb machine following its programming", you're deceiving yourself.

For example, with enough data an AI could reconstruct a "most likely artist" based on commentary and influence. If Artist A began a movement, influencing Artist B, C, D, while being commented on in the works of Author A and B, the AI can analyse that and create works which would be along Artist A's style. AIs are better at doing this than humans are. Way better. This can also be run backwards, to find what future author would be influenced by any given authors... Which is how AIs work today (for the most part)... and how humans work.

Today's AI models get worse the more you study then, they have the general idea, but don't understand finer concepts, like the Wright Flyer or the Model T. There's no reason that tomorrow's AI would be so limited.