With a lot of computer grading it wants an answer a very specific way and the grading is automatic and unable to be changed, which causes a lot of issues as a student may have a correct answer, but if it isn't written out specifically as the computer has been programmed to accept it, it will be marked wrong. Generally, also, computer grading is simply a perfect grade or a score of zero, no in between grades, so yes, it is bad for students.
A computer is simply black or white. No shades of gray. It is either right or wrong, where as a human can make a decision and at least give partial or half credit. There is room for error through both, but you can "argue" your way out of a wrong answer. It may just be worded differently.
While there are some "it's right or it isn't" things like math equations, a lot of things students get graded on have at least some wiggle room for interpretation that a computer cannot capture. Writing styles differ, approaches to making a point are vastly different from student to student, there are a lot of things a computer cannot grade well now and never will be able to.
Computer grading isn't bad for students, it is simple a fact of being a pupil in contemporary society. The only thing we don't need computers for is to take cash out of our wallets or to use water in our house. Computers are here to stay and kids use devices younger and younger now.
Computer grading systems leave less room for bias in the grading process. I'm not accusing teachers of intentionally implementing unfair grading practices, but teachers are human too. Certainly there are subconscious biases. A computer won't be influenced by whether or not a parent is on the school board and a computer won't give "leeway" to athletes on the winning sports team.