Saying the issue here is AI seems like nonsense to me. The issue is that not many tools localize to Icelandic. LLMs are just some of those tools.
Anyway, languages rise and fall. Hell, Hawaiian was practically extinct at one point and nearly entirely undocumented. Hebrew was extinct for over 1000 years before being revived.
To me anyway, what's most important is documentation. As long as the shift is organic, the rise and fall of languages doesn't bother me at all. Let's just make sure that the languages are very well documented so that the languages are never forgotten. They are one of the most important aspects of cultures, after all.