IANAL but that sounds like harrassment, I assume the legality of that depends on the context (did the artist previously date the subject? lots of states have laws against harassment and revenge porn that seem applicable here [1]. are you coworkers? etc), but I don't see why such laws wouldn't apply to AI generated art as well. It's the distribution that's really the issue in most cases. If you paint secret nudes and keep them in your bedroom and never show them to anyone it's creepy, but I imagine not illegal.

I'd guess that stability is concerned with their legal liability, also perhaps they are decent humans who don't want to make a product that is primarily used for harassment (whether they are decent humans or not, I imagine it would affect the bottom line eventually if they develop a really bad rep, or a bunch of politicians and rich people are targeted by deepfake harassment).

[1] https://www.cagoldberglaw.com/states-with-revenge-porn-laws/...

^ a lot of, but not all of those laws seem pretty specific to photographs/videos that were shared with the expectation of privacy and I'm not sure how they would apply to a painting/drawing, and I certainly don't know how the courts would handle deepfakes that are indistinguishable from genuine photographs. I imagine juries might tend to side with the harassed rather than a bully who says "it's not illegal cause it's actually a deepfake but yeah i obviously intended to harass the victim"