We have this problem at my institution as well. I am encouraged by @BenI's experience and I agree the best approach is "[enlist] the students as partners in their own learning". I am intending to start by explaining why AI is bad for helping them to learn programming but when they know how to program competently, that is the time to use AI to automate programming tasks. Essentially to use the tools in industry they need to be able to understand the code generated by the AI and evaluate whether it is good code (from various perspectives). The analogy I have used before is that expected to learn by watching someone else code (which includes me, youtube videos and AI tools) is a bit like going to the gym and watch other people pump iron and wonder why your muscles aren't growing. You will learn a bit about good form and how to make an exercise program, but for some things there is no alternative to doing the work yourself. What you want is something like a spotter - who provides minimal help allowing you to complete your set (and I mention that the teaching assistants in the lab are very good at helping you to solve your problems without just telling you exactly what to do).
I think a large part of the problem is that using AI will encourage surface learning rather than deep understanding. Another approach might be to emphasise that for employability, you need to be able to add some value to the AI tools. As the tools get better, it will be easier to generate prompts and using AI to generate code will just be an everyday skill that the general public have. It is a bit like the late 90s/early 00s people made good money writing web sites for people and small companies, but these days people can do that for themselves using e.g. SquareSpace and WordPress. The students will need to be able to understand the code and do the parts of the task the AI can't do adequately (because it doesn't understand the code). For that you need more than shallow learning. If they know that, it may help them make a better choice about surface and deep learning strategies?
Problem solving is the part of programming that will suffer the most. I've taught programming for nearly 30 years, and as the amount of online tutorial material has increased, average student problem solving ability has gone noticeably down (but not coding). I suspect AI tools will accelerate that for students that opt for a surface learning approach.
I'm going to make the video on how to install the tools (InteliJ) quite soon, and I will definitely be showing them how to turn the AI assistant stuff off. I personally don't like the help the IDE constantly tries to give me - I generally find it just disrupts my concentration, so I often turn all that off as well.
One solution to assessment is to give them a substantial programming task in advance, so they can spend the usual several weeks on the problem solving and working out how to code things, but then have them rewrite it from scratch in exam conditions in the lab, with restricted access to the WWW (e.g. pre-specified reference material). If they have understood what they were doing in preparation, they should be able to complete the task in a few hours. If they try to remember everything without understanding, they will struggle. It will however increase the stress of the assessment.
Sorry that these are somewhat incoherent ramblings, but I think this is an important topic and I am unhappy at the producers of AI tools for targeting students (e.g. with free licenses) without first having conducted meaningful research into whether it is beneficial.
I feel very sorry for modern CS students. It was much easier to learn to program when I learned (early 80s) when you were forced to learn things by reading books (great for both breadth and depth of knowledge) and by writing programs. In those days getting the computer to do anything was an achievement and was rewarding - much more difficult now that tools/frameworks can help you do quite impressive things without necessarily having much of a clue what you are doing and for every sensible program you can think to write there will be solutions or tutorials available online. The modern environment is far too helpful to be good for learning.