Misrepresenting the target group is just an added bonus. It's like referring to all indigenous people as "indians" - even if they were from India (which they're not), it's just taking a blanket term and making them all seem like they're the same. At least that's why it's even funnier in this context.

But generally speaking, when people unironically use the term to refer to all whites, well, that just shows that they don't really understand the meaning of the term they are using.