In VSC when the Terminal is in the focus, Cmd K hotkey stands for Clear which clears the log. With the recent update 0.12.0 it also triggers the command instructions for the Terminal.
I see how this makes sense since it’s the same command in the editor, but it also introduces the hotkey conflict.
You can change this by going to the keyboard shortcut settings (cmd-shift-P “open keyboard shortcuts”) and then reassigning the keybinding for cursorai.action.generateInTerminal.