I'm looking for AI that can generate hypno stories.

Hmmmm, let's see... I would suggest for you to be a little be more specific in what you are searching.

Roleplay? You can either go with NovelAI generator (subscription based) or your own by using KoboldCPP combined with an UI (like SillyTavern or TavernAI, I suggest the first) by also downloading a text model. Which one I cannot say: my favourite one is Rose, but I also have a beefy pc, so...

Writing assistant? Kobold + Tavern + Erebus Text Model, specifically made to help in writing erotic stories.

ChatBot? Kobold + SillyTavern once again, altough I'm pretty sure there are other alternative outsides (that I don't know, sadly).

Hope this helps.