100%. If an author has either not read or not understood a source they've cited, then that would be grounds for a desk reject. A "blessing" of AI hallucinations is that this kind of author is suddenly a lot easier to spot...
A corollary to this principle is that finding a single hallucinated citation should lead to an automatic rejection. Automatic. This should be a matter of policy. And this is one of easier AI-related problems for our journals!