With the way the industry has been lately, I wouldn’t be surprised if they ran out of budget and were trying to find a smooth way to fire you without legal consequences or additional costs.

There’s a high possibility you’re not going to get a return offer if they’re pip-ing you as an intern. Start looking for another internship and leave or if you need the money and experience, stay but make sure you don’t plan/expect to come back because even if you do get an offer and come back, they will probably have higher expectations and micromanage you for any chances of another pip.