Agreed, I remember feeling really sorry for the students, who were so proud to be allowed to present their project to the master, just to be murdered by him in front of the class. That behavior is not acceptable, especially not from a teacher/master. I felt embarrassed myself, just from watching the video. On the other hand, Miyazaki is known for very aesthetic, classic, hand made animation, so it is not that surprising he disliked the weird, AI generated demo they showed him. Also, as he said in the video, he has a friend who is physically disadvantaged and the demo reminded him of his suffering friend. Probably he acted in an oversensitive/irrational way because of this.