They could, but I think what will actually happen is the same "race to the bottom" of anything else - because education is after all a business.Like what? Lecture planning, test grading, one-on-one instruction, administrative tasks? The parts that cannot be automated could be given additional emphasis.
AI generates a lecture, deliver it as asynchronous online (i.e. a recording) rather than live. All you need is a staff member to give it quick once over to check mistakes. In theory, the staff time could be then dedicated to more small group, interactive teaching... but it probably won't, when the course can be delivered so much more cheaply with the same handful of perfunctory tutorials as there was under the old live lecture delivery. This probably won't be such a big deal at the high prestige universities as they tend to be awash with money, but the middle and lower level ones might be readily gutted of staff.